Reference fields are greyed out in the form when you click on "New" on any reference lookup list.
The system will not allow you to create an infinite loop of records.
Please find the below example:
1) Open any incident.
2) Click on Related records section.
3) Click on reference search Icon on Problem.
4) Click on New
4) On the new problem, record observe that the reference icon is read-only.
Observe that all the reference fields in the problem are greyed out.
Clicking on Reference and New is supported only till one level as this can go on loop.