If you're laying a tile floor in a bathroom for the first time you might be stymied as to how you cut the tile around the toilet flange. All marks on the tile should be made with something that won't dissolve in water right away, I usually use a medium sized Sharpie.
Step 1: Lay your tile that is going to go around the flange in place and make marks on the edge of the tile just outside where the edge of the flange meets the tile.
Step 2: If you got an "A" in geometry and you haven't been drinking beer all afternoon sketch out the portion of the circle you need to cut on the tile. If you stank at geometry or you're on your third tumbler of scotch find something from the kitchen that has a little larger diameter than your toilet flange to trace around. (Important note: do not leave permanent magic marker around the edge of your best china unless you're single or wish to become so.)
Step 3: With your wet saw, begin making straight cuts into the tile ending at your magic marker line. Make the cuts about a quarter inch apart. When you get to the line carefully, firmly and slowly tilt the forward edge of the tile up in the air until the cut runs straight through from top to bottom. Keep your hands well clear of the blade!
Step 4: The pieces between the cuts should easily break away from the tile, holding the tile at an angle gently move the tile back and forth so that the saw blade cleans and rough edges sticking out.
Step5: Set the tile and repeat the process with the next tile around the flange.
A note on the proper height: plumbing codes require that the top surface of the flange be level with the top edge of your flooring. In some cases you may find it hard to accomplish this. If the flange is a little low you can use a jumbo wax ring to make up the difference. If the flange is sitting higher than your tile it has to be lower than the bottom of the toilet that is sitting over top of it while still allowing some space for the wax ring to form a seal!! Lay a straight edge across the bottom of the toilet and measure to the lip on the toilet drain opening to make sure a raised flange will work.
As a side note if the hole happens to land inside a full tile you will want to measure the distance to the center of the flange off two other tiles and mark that center point on your tile to be cut (don't forget to subtract the width of the grout joints!). Now trace or mark your circle with a compass. Determine which edge of the tile will not be seen once the toilet is installed. Starting on that edge make two cuts that intersect with the edges of your circle, and repeat the above method between the cuts. See helpful diagram below: