In this circuit, we have a switch that controls the supply of current to an inductor. An inductor resists any changes in current. If you open the switch, the inductor tries to maintain the same current; it does this by charging the capacitance between the contacts of the switch. (Any two wires in close proximity have some parasitic capacitance between them.) There is a small capacitor (much larger than the actual value) across the switch terminals to simulate this. When you open the switch, the voltage goes very high; in real life, this would cause arcing.
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