Why were the Israelites not circumcised in the desert? Genesis 21:4 (NIV) When his son Isaac was eight days old, Abraham
  circumcised him, as God commanded him.


Starting with Abraham, the Israelite men were circumcised, and boys at the eighth day after birth. It was commanded again in the desert through Moses:


  Leviticus 12:3 (NIV) On the eighth day the boy is to be circumcised.


But the children born in the desert were not circumcised:


  Joshua 5:5 (NIV) All the people that came out had been circumcised,
  but all the people born in the wilderness during the journey from
  Egypt had not.


How is this possible? Did they disobey God and not circumcise their children in the desert?
Keil explains it well:


  The sentence upon the fathers, that their bodies should fall in the desert, was unquestionably a rejection of them on the part of God, an abrogation of the covenant with them. This punishment was also to be borne by their sons; and hence the reason why those who were born in the desert by the way were not circumcised. (Commentary on the Old Testament by C. F. Keil)


As the covenant of the Lord with the fathers was broken, the sons of the rejected generation were not to receive the covenant sign of circumcision. This curse upon the fathers, casting some shame upon the children for a period seems more like probation.  As far as the nation as a whole was concerned the covenant was not fully collapsed. 
Only until the generation of men that were capable of bearing arms when they came out of Egypt were all dead would the younger generation which had grown up in the desert be under the shame. When the  time of punishment was over and the temporary suspension of the covenant passed, it was a good time to renew the terms of the covenant with a new generation.