Understanding point of view -- POV, as writers sometimes call it -- is as necessary to the process of writing as knowing the rules of the road is for driving. If you don't know which side of the road to drive on, you are doomed to have a short career behind the wheel.
Does that mean POV is dull? A dry fundamental, something to be gotten out of the way before moving on to fun topics like voice and conflict? Definitely not. The power of this element of writing is subtle, and it tends to work invisibly. When you get into your car, you don't have to remind yourself to stop at traffic lights; just the sight of an orange light will trigger an automatic reaction.
Experienced drivers rarely consider the intricacies of basic traffic law, but remember:
Point of view is crucial in just the same way, and often just as invisible.
Enough of the sales pitch. What is POV?
Let's start with the concept of a narrator, the invented persona within the piece who tells your story to the reader. In Jane Austen's Emma, for example, the narrator is an all-seeing nameless presence (an omnisicent point of view, in other words) who freely expresses Jane Austen's opinions of her characters and their situation as it shares her tale. In John Irving's A Prayer For Owen Meany, the narrator is John, a character who witnesses the novel's important events.
The point of view you can use in a work of fiction varies. A story can be narrated in an objective, "news reporter"-style or it can get up close and personal. It can be delivered using that all-seeing presence utilized by Austen, or in an off-beat second-person style that casts you, the reader, as an actor in the story's events. (Try reading Italo Calvino's If On a Winter's Night a Traveller to see how extreme a second-person point of view can get!)
POV is also dependent on time. Writers can tell the story as it happens, after its events have occurred or--in exceptional cases--may use a future tense that describes events before they have taken place. The good news, though, is that few--if any--of us use all of the POVs regularly. Most writers find two or three POVs that feel natural--that work well with their particular voice and storytelling style. Using those POVs as a foundation, they can experiment with other POVs less frequently.
First Person Past: This technical-sounding term describes a mode of storytelling many writers find comfortable and easy to master. The narrator is a distinct individual speaking in their own voice, an "I" describing events that have already occurred:
Note the past tense of the verb "to go." We call it First Person Past because the story's events have already taken place. This differs from...
First Person Present: Now the "I" narrator is telling readers the story as it happens, in present tense.
Using present tense can convey immediacy and increase suspense. Some readers, though, find it artificial and intrusive.
Second Person Past and Second Person Present: In the second-person POV, the author casts the reader as narrator.
Second person grabs readers' attention, but it is distracting and hard to sustain in longer works of fiction. In the Calvino novel mentioned above, the second-person chapters are short and alternate with chapters that use more conventional points of view.
(That's right! You can change the point of view within a work of fiction!)
Third Person--Another comfortable point of view, third person centers our narrative within one of the story's major or minor characters.
Later on we'll talk about even quirkier aspects of POV, because third Person narratives can be objective, limited, or omniscient.
By now you've absorbed a ton of information about point of view. But what are you going to do with it? Returning to our traffic-law analogy, most of what you've just learned will serve as background knowledge, useful but mostly invisible information that will help you avoid storytelling 'accidents.' Understanding POV will keep you from using your "I" narrator to tell us another character's thoughts. It'll prevent Susie from giving us vivid details of Johnny's collapse and trip to the hospital--unless, of course, she catches him as he falls and rides along in the ambulance.
When choosing a point of view for a given piece, the most important consideration is: what serves the story best? What will provide the clearest, most engaging narrative for your tale? If you're stuck, write your opening paragraphs in a few different POVs and see which works best.
Remember that, deep down, you probably already know how a given story should be told. As always, your writer's instincts will be your best guide.