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While watching season 5 episode "Follow the Leader" I finally realized what the loop in the story is. When they go to the scene in 2007, following the events of the episode "Dead is Dead", when Locke (the nemesis) meets with Richard at the Others' camp and tells him that he now has a purpose. Locke, Richard, and Ben travel to the location that the time-jumping Locke will appear, so that Richard can remove the bullet from his leg and tell him what needs to be done.
There is the LOOP!!, when Richard gives time-jumping Locke the COMPASS so he can give it back to the Richard of 1954; and then Richard 2007 will give it back to that same Locke after the Not-Locke ask him to do so. That will happen over and over (LOOP) and the questions are: is that compass even real? Where did it come from if they always pass it on and on? Dude, that is weird!
What do you think about that?!