Damp fog enveloping circle (5)
I believe the answer is:
moist
'damp' is the definition.
(I've seen this before)
'fog enveloping circle' is the wordplay.
'fog' becomes 'mist' (mist is a kind of fog).
'enveloping' is an insertion indicator.
'circle' becomes 'o'.
'mist' placed around 'o' is 'MOIST'.
(Other definitions for moist that I've seen before include "Slightly wet, damp" , "Damp, humid" , "bit wet" , "lubricated" , "Dampish" .)