The following might help clear things up:
A more accurate statement of "what the magnetic field does to a charged particle" is this:
a magnetic field tends to "turn" (and not change the speed of) a moving charged particle...
since \vec v \times \vec B is always perpendicular to \vec v. (Of course, if \vec v \times \vec B is zero, then the magnetic force does not deflect the particle.)
When that magnetic field happens to be uniform in space (and time) and
when there happen to be no other forces are acting,
i.e., "a charged particle only under the influence of a uniform magnetic field",
then that charged particle travels in a circle (assuming \vec v \times \vec B is nonzero).
(Obviously, this result is a very special situation.)
It's great that you learned that result in high-school.
Now, it's time to learn WHY that result is true... what laws of physics are being used (Lorentz Force, Newton II) and what special assumptions were made (static uniform magnetic field and no other fields or forces)?
The problem you posed considered the case of a charged particle at rest in a magnetic field and how that situation is viewed from another inertial reference frame[/color]. Asking about what happens in this other frame of reference invokes another law (or princple) of physics: the principle of relativity[/color]. As has been mentioned numerous times above, there is an electric field [as well as a different magnetic field] seen by the moving observer. To that moving observer, the situation is NOT that of "a charged particle only under the influence of a uniform magnetic field"... so that observer should not expect that charge to travel in a circle.
In fact, as I hinted above, the particle travels with constant velocity in a straight line in S'. Specifically, if the particle is at rest in frame S, and the observer S' moves with constant velocity \vec U with respect to S, then, from frame S', the particle must move with constant velocity -\vec U with respect to S'. For this to happen, S' must see a zero net-force on the charged particle.