It forms a ring in two ways (5)
I believe the answer is:
atoll
'it' is the definition.
The definition suggests a singular noun which matches the answer.
'a ring in two ways' is the wordplay.
I cannot quite see how this works, but
'a' is found in the answer.
'ring' could be 'toll' (ring a bell) and 'toll' is present in the answer.
This accounts for all the letters.
This explanation may well be incorrect...
'forms' is the link.
Can you help me to learn more?
(Other definitions for atoll that I've seen before include "tropical island" , "Bikini for one" , "Allot (anag.)" , "Coral island surrounding a lagoon" , "Coral circle" .)