A literary story must have a series of events and/or incidents. The plot often includes an inciting incident near the beginning of the story, a conflict between opposing forces, rising action leading up to a crisis, or turning point, between the characters and a resolution that wraps the story up. For example, in "The Old Man and the Sea," by Ernest Hemingway, the plot revolves around a fisherman in the Gulf Stream struggling with a giant marlin.
While the plot refers to what happens in the story, the theme focuses on what the story is about on a more universal level -- what message, or messages, the author is imparting about society, culture, personal development and the like. In "The Old Man and the Sea," one of the major themes is the honor that is associated with struggle and defeat, as evidenced by the aging protagonist's struggle to catch the marlin, which is portrayed as very noble.
The appearance, desires, shortcomings and personal history of the characters plays a pivotal role in the development of a story. Round characters are well-developed individuals, about whom the reader is given exhaustive information both in terms of visual (appearance, clothing, living situation, family life, job) and non-visual (needs, wants, hopes, dreams, fears, secrets) characteristics. Flat, stock and stereotypical characters are usually far less developed but can also be important.
The setting of a story refers to the geographical location, time period, climate and socioeconomic characteristics of the characters' surroundings. The setting often provides social, historical or cultural context for the plot and/or theme of the piece, and descriptions of setting can sometimes symbolize a character's own emotional state. In William Shakespeare's "The Tempest," for example, the raging storm helps to establish characters' chaotic states of mind.
How the author has chosen to tell a story is another fundamental element of literature. The two major points of views are first person and third person. First person narrative refers to the main character telling the story using "I" and "we." Third person narrative usually involves an unseen narrator who tells the story from an all-seeing (omniscient), partially all-seeing (limited omniscient) or totally objective standpoint.