Literary Terms

Action
The events of a story as seen from the higher level of the plot.  Unlike blocking details or writing in scene, a whole scene may be required in order to reveal a single action (e.g. Romeo bids Juliet farewell)

Antagonist
This is the character who opposes the Protagonist (or Main Character) of a story.  See also Protagonist, Foil.

Blocking
Details of a character's movements and expressions taking place within a scene.  (e.g. "Romeo enters the room.  He raises his sword.")

Causality
The logical flow of events or details in a written work, the chain of cause and effect within a work. (e.g. "The dinosaur entered the room. This made me very afraid. So I ran into the kitchen and locked the door.")
Please Note: Velociraptors can open doors, and they do not know fear.

Character
1. An individual person within a story.  See also Antagonist, Protagonist, Foil, Main Character, Secondary Character, and This Article on Character in Literature from About.com.

Cliffhanger
An abrupt ending to a narrative or subplot in which an intense conflict is introduced but not resolved.  This is done to develop tension and/or encourage the reader to purchase a sequel.

Conflict
The struggles faced by the characters of a story.  Typically, a short story focuses on one conflict faced by the protagonist, whereas novels can explore multiple conflicts affecting several different characters.
Internal Conflict is conflict which the character faces within his or her own mind (e.g. "do I eat the chocolate, or don't I?")
External Conflict comes from outside the character, and usually involves the protagonist in his struggles either against other characters, nature, or elements of society.  Stories with good characterization almost always feature internal emotional conflict, even if the internal struggles are triggered by external events.
Primary Conflict: This is the core conflict which drives the entire story, the one conflict which directly or indirectly involves every character in the story.
Secondary Conflict: A conflict in the story which affects some but not all of the characters.  This kind of conflict is usually resolved in the subplot of a story, but the resolution of this conflict should somehow inform our understanding of the primary conflict.

Denouement
From the French, this literally means the "untying" at the end of the story, when the central knot of the conflict is completely resolved.  Key to the denouement is the sense of emotional realization at the end, when the characters realize how the central conflict has the changed their lives.  See also Resolution.

Detail 
see also Blocking Details
see also Setting Details
Context Details: These details are used to establish the relationships between characters and details of a given piece.

Dialogue
The words spoken by individual characters.  Direct Dialogue is the exact words as they are spoken, and is typically enclosed within quotation marks (e.g. "Art thou thy Romeo?")  Indirect Dialogue is a report of what a character said, often summarized.  Because it takes place within the narrative, it is not enclosed within quotation marks (e.g. She asked if he was her Romeo.)

Event
Something that happens within a story, often within a single scene.  The story is the chronological (and hence causal) sequence of events in story, whereas the plot is the order in which the events are told in the narrative.  See also Action.

Foil
A character who serves to complement the protagonist, usually through either distinct similarities or through significant differences which place the characters in natural conflict.

Function 
The purpose of a literary device.

In Medias Res
Latin for "Into the Middle of Things," this refers to the narrative technique of diving right into the story without first providing an explanation to center the reader.  See Also Wikipedia.

Narrative
Essentially the "telling" of the story.  In one sense, this refers to the structure of the story as a whole - the voice of the story, the order of the plot, and the mode in which the story is told.  From the perspective of technique, narrative refers to all sections of text which are told to us by the narrator (i.e. all sentences which are not part of the dialogue or included from an external source such as a letter, photo, or map).
Linear Narrative - a work in which the events are told to the reader following the same chronology in which they occurred.
Nonlinear Narrative - a work in which the events are told in a non-chronological (or non-sequential) order.
See also Story vs Plot from Writing the Human
Metaphor
Presenting a concept as an unrelated concept in order to highlight specific attributes.  This is often used to describe abstract ideas using concrete images (e.g. "Hope is a bird before it takes flight.")  See also Simile.

Nuance
This is the careful process of overcoming stereotypes by using fine shades of meaning and detail.  You might think of this is exploring the "gray areas" between black and white.  This is particularly important in the development of complex characters in longer stories.

Parody
Parody is when we mimic the style or conventions of a particular art form in order to poke fun at the nature of the art.  This should not, however, be confused with Satire.

Place
The location where a story takes place.  See also Setting.

Plot
The order in which the events of a story are revealed in the narrative.
Subplot: a component of a larger story in which a secondary conflict is resolved.  A subplot usually involves only a subset of the complete cast of characters, and it need not necessarily run through the full length of the work.
See also This Definition of Story vs Plot from Writing the Human.

Point of View (POV)
The perspective from which a story is told.  See also Telling the Story: Point of View
1st, 2nd, and 3rd Person
A story told from a Limited perspective only provides information as it becomes available to a single character.  An Omniscient narrator, on the other hand, has access to all knowledge within the universe of the story, and can relate details to the reader which would not be known by the main character.

Protagonist
The Main Character of a story (i.e. the individual who must solve the central conflict.)  See also Antagonist, Foil, and Character

Resolution
At the end of a story, the resolution comes when all the external conflicts are taken care of (i.e. the story is "solved.")  See also Denouement.

Satire
We use satire either to illustrate humorous aspects of society or to point out injustices using comedy. Unlike Parody, the focus of satire is on social conventions rather than making fun of artistic conventions.

Sequence
The causal relationship between events in a story (i.e. A leads to B leads to C - or, if we were to reverse the plot: C happened because of B, which happened because of A.)  See also What Plot Sequence Means in Literature from Answers.com.

Setting
All the details regarding the Place of a story.  Unlike place, which centers on location, setting also focuses on every detail of that location.  Setting details are often used to reveal the tone of the story.

Simile
A comparison between two objects using "like" or "as."  See also metaphor. 

Story
See also Story vs Plot from Writing the Human

Structure
The overall layout of a story or poem in terms of the scenes and transitions.  This is essentially the foundation of the plot.  A storyboard is a visual summary of a movie's structure, using an image and perhaps a few sentences to given the essence of each scene.

Style
A "brand" of writing which may be identified by the choice of techniques.

Suspension of Disbelief
The reader's tacit acceptance that a story or poem could be true given the rules of the fictional universe.

Technique
This is the broad term applied to the individual aspects of style such as sentence structure, diction, dialogue, and exposition/narrative.  Individual authors can often (but not always) be identified by their use of technique throughout a story (e.g. Hemingway's use of very short, terse sentences and the minimal use of context details or personal reflection.)  Artistic approaches such as Minimalism, Post-Modernism, and Expressionism are marked by specific techniques which are used by a variety of artists.

Trajectory
This describes way a given work "crosses" from the writer to the audience, or it's effect on culture and society. Certain documents - such as Congressional Bills - have a specific intended trajectory, but the unintended trajectory can have unforeseen social consequences.

Voice
The unique style of speaking or storytelling adopted by the narrator or a given character.  Note that voice should always reveal the inner mind and thoughts of the character who either speaks the dialogue or shares the narrative.