We often refer to classic Hollywood screenplays as having a three act structure — the arrangement of a story around three pieces of narrative real-estate — but the root of this idea lies with Aristotle, and his notion that every story has a beginning, middle, and end. This arrangement lies at the basis of almost all the traditional dramatic structure in storytelling, including the novel.
The Function of Each Act
Each act has a specific structural function to perform, which it does by organising the pace and depth of the information it releases to the reader or audience.
The function of act I is to set-up the story. It does this by establishing the main characters, time-period, and setting in which the story unfolds, and defining the goal, and the conflict which arises from the pursuit of the goal. This act, which contains the inciting incident — an event that sets it all in motion, sets the protagonist on his/her way to achieve the goal.
The act also defines the first step in examining the theme of the story. In The Matrix, for example, that question is whether human ingenuity, spiritual strength, self belief, and endurance, can defeat the seemingly impervious strength of the Machine world.
Act II is primarily concerned with developing the seeds that have been sown in the first act. This act deepens the conflict resulting from obstacles to the goal, while simultaneously developing the protagonist, and other characters, in response to these obstacles. This act is balanced by the mid-point, a moment in the story in which the protagonist considers whether or not to throw in the towel and turn back from the goal in the face of mounting difficulties. This decision is encouraged by an event which reveals a secret truth about the protagonist — some hidden strength or quality which equips him or her to face the challenges ahead with renewed resources.
The act continues to probe the thematic question, although it does not yet provide an answer to it. In The Matrix example, the answer to the final outcome of the battle between man and machine see-saws through many iterations, and remains unresolved. Act II is the longest, most intricate, and complicated part of the story.
Act III typically pays-off, and resolves, through the denouement, the questions and puzzles set up by the previous two acts. It answers the main dramatic question of whether the Hero will succeed in attaining his/her goal. The third act also settles the theme. If the theme of The Matrix is about whether or not self-sacrifice serves the greater good, the third movie in the trilogy, The Matrix Reloaded, settles it in the affirmative, as a result of the final conflict.
A three act structure allows the writer to craft a story that has a beginning, middle, and end. All three acts have their own function to perform. They collaborate to produce the theme of the story, as a result of the final conflict in the third act.
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