Whats with the half halo thing over my head??? Forgive me for asking I am new to Oblivion and I don't have a book yet for this game?? What does this yellow half shaped circle that appears over my head mean plz???

I'm betting you're in 3rd person mode, and you're seeing one of the forms that the targeting "crosshair" can take. The little arc symbol tells you the health of the person you're looking at; it appears when the person has taken damage, and it gets smaller as the target's health gets lower.

ok so it must be my health showing i only play where i can see my avatar character does it show over your horse if they take on damage too??

It's probably your horse's damage that you're seeing. Your own character's Health is indicated by the red bar in your display.