This is a common concept in music synthesis, as you can create an endlessly rising 'melody' by repeating only 1 octave of some properly constructed timbres. This is the 'strange loop' he's referring to.
Bach's canon is not a Shepard tone. A Shepard tone would have been a more credible example of a "strange loop" than Bach's canon. But "Godel, Escher, Shepard" doesn't have the same ring to it.
He actually does discuss Shepard Tones and the Shepard Scale in the book, and explains how he thinks they are related to Bach's compositions.
Near the end of chapter 20, there is an example of a harmony that, when looped, creates the illusion of an endlessly rising melody.
In this harmony, the loudness of each note in the melodies rises and falls so that the lower melodies feed into the the higher melodies and ultimately fade out. In our brains, we hear this as an endlessly rising melody.
http://en.wikipedia.org/wiki/Shepard_tone
This is a common concept in music synthesis, as you can create an endlessly rising 'melody' by repeating only 1 octave of some properly constructed timbres. This is the 'strange loop' he's referring to.