Most fiction is based on three acts, although I suppose you could have more. Fiction should be like a hill. Act I takes you to the base of the hill. Act II is the actual hill and Act III is what happens after the climb. Perhaps a better analogy would be that the story is like a rollercoaster. Act I is the long climb to the top of that first hill in the ride. Act II are the ups and downs of the ride while Act II is the rush down the last hill before the end of the ride.
Act I is where the author sets up the story, climbing that first hill. This is where we meet the main characters and learn what their goals are, well, most of their goals, anyway. We learn who they are and what they want for the most part some may have hidden goals. Or perhaps they don’t even know their goals, yet. The first act is where we get onto the ride. Filled with anticipation, we climb into the cars. It’s a ride we have never been on before, maybe it’s Space Mountain at Disney World, and the hills and valleys are in darkness, hidden from us. The ride starts and we climb to the top of that first, the largest hill. It can seem like a long haul up that hill, but the rush down the other side is exhilarating. Suddenly, we hit the low and begin climbing again. Now we are in Act II.
Act II is where all the action is. It’s also the longest act in the story. like a roller coaster, it should have areas where the action is slow and climbing to a climax at the top of the next hill, followed by the rush down to the low beyond. How many hills there are in the rollercoaster depends on the story. A short story may have one or two; a novel could have quite a few more. The longer the ride, the more hills there should be. Every hill in the rollercoaster represents hurtles that the hero has to get over to reach its story goal, whatever that may be. The characters in a story have to solve many problems as they strive to reach their goals. That’s what makes fiction work. The reader has to care whether the character can make it to the top of the next hill and survive the rush to the bottom again. The action needs to rise and fall like the cars on a rollercoaster in order to move the story along and reach the end.
Act III is the denouement, or where the story threads are tied off. It’s the conclusion of the ride, the downside of the last hill of the rollercoaster. It’s the gentle glide to a stop before you exit the ride. It should also ensure that all the story questions are answered and all the characters’ fates are revealed. We should feel exhilarated and sad that the ride/story is over by this point. Any other reaction and the author has failed to enthrall its readers. That would be a poor rollercoaster.