One of the most frequently observed symbols while travelling in the mountains is the diagram of ‘Wheel of Existence’ (skt bhavachakra, Wyl. srid pa’i khorlo), a traditional representation of the samsaric cycle of existence.
It is said that Buddha himself commissioned the drawing to depict the inner psychological states of our existence and he encouraged to keep it in the entrance of the monasteries. This is probably the first ever Buddhist symbol that existed. The reason Buddha encouraged it was to impart profound Buddhist philosophy of life and perception to more simple-minded farmers or cowherds. The symbol was meant to communicate to ordinary people.
The meanings of the main parts of the diagram are:
The centre of the wheel represents the three poisons.
The second layer represents positive and negative actions, or karma.
The third layer represents the six realms of samsara.
The fourth layer represents the twelve links of interdependent origination.
The monster holding the wheel represents impermanence.
The moon above the wheel represents liberation from the samsaric cycle of existence.
The Buddha pointing to the moon indicates that liberation is possible.
The Dalai Lama writes:
Symbolically [the inner] three circles, moving from the centre outward, show that the three afflictive emotions of desire, hatred, and ignorance give rise to virtuous and non-virtuous actions, which in turn give rise to levels of suffering in cyclic existence. The outer rim symbolizing the twelve links of dependent arising indicates how the sources of suffering—actions and afflictive emotions—produce lives within cyclic existence. The fierce being holding the wheel symbolizes impermanence…
The moon [at the top] indicates liberation. The Buddha on the left is pointing to the moon, indicating that liberation that causes one to cross the ocean of suffering of cyclic existence should be actualized.
Source: Rigpa Wiki