Most good stories start with a fundamental list of ingredients: the initial situation, conflict, complication, climax, suspense, denouement, and conclusion. Great writers sometimes shake up the recipe and add some spice.
Initial Situation
Stage Identification: Three party boys gather in a tavern one morning, where they see a corpse go by. They learn that the body is that of a friend, and that he's just been killed by the same person who's taken many lives all over the countryside that year, a mysterious stranger named Death.
Explanation/Discussion: This initial situation sets us up to expect a downfall for the three "heroes," since it places them at a tavern at nine in the morning before going into detail about all the horrible sins associated with taverns, and the horrible fate that awaits sinners like them. All that remains to be seen is how this downfall will happen, and with the mention of Death, we can already begin to imagine the possibilities.
Conflict
Stage Identification: The Three Rioters swear a pact of brotherhood and make a plan to kill Death in revenge for all the murders he's committed.
Explanation/Discussion: Here the Rioters explicitly declare themselves the enemies of Death, and commit to a course of action that puts them in direct conflict with him, since we can assume that Death has an interest in living. Wait—is that weird? Anyway…
Complication
Stage Identification: The Three Rioters meet an Old Man on the road who tells them they can find Death under a tree in a nearby grove. Once there, they find eight bushels of gold and abandon their quest to kill Death.
Explanation/Discussion: Who's the mysterious Old Man the Three Rioters meet? He's old and withered and imparts lessons about respect for the elderly – what does any of this have to do with the story? Things are definitely getting complicated. But when the Old Man directs the Rioters to Death's location, it all starts to make sense – this guy's a guide of sorts.
Climax
Stage Identification: The Rioters arrive at the grove and find eight bushels of gold; they decide to keep it all for themselves, waiting for nightfall to carry it off to one of their homes.
Explanation/Discussion: This moment in the tale substitutes a different climax – the unexpected discovery of the gold – for the one we were expecting, that confrontation with Death. Or does it? Could it be that the unexpected discovery of gold is the Three Rioters' meeting with death? Given that the theme of the tale is "greed is the root of all evil," we're going to guess the answer is yes.
Suspense
Stage Identification: Two of the Rioters plan to kill the other upon his return so that they only have to split the gold two ways. Meanwhile, the other one buys a bottle of poison and doses his friends' bottles of wine with it, hoping to have all the gold for himself. So O. Henry.
Explanation/Discussion: The characters make many plans at this point in the tale, which leads to lots of suspense about whether they'll carry them off without a hitch. Will the youngest rioter suspect his friends are up to something and ambush them? Who'll get the gold? Will some other mysterious force intervene, twisting the plot in a way we weren't expecting?
Denouement
Stage Identification: The two rioters stab their friend to death when he returns to the grove. They sit down to eat and drink, and end up drinking the poisoned wine and dying horrible deaths.
Explanation/Discussion: Well, this scene answers all the questions we were wondering about in the suspense portion of the Tale. Something did indeed go wrong with the rioters' plans. Neither party was able to anticipate the treachery of the other.
Conclusion
Stage Identification: The Pardoner curses the sins that showed up in the Tale, then laments that mankind acts so falsely and unnaturally toward God, to whom they owe an everlasting debt for creating them and redeeming them from Hell.
Explanation/Discussion: During his conclusion, the Pardoner shifts in focus from the specific sins that occur in the Tale to a general discussion of all sin, the implication being that everyone's guilty of it, and thus, of offending their creator. This is probably all calculated to put his audience in a guilty and penitent mood just when he's about to step up his sales pitch.