Even the most realistic story inadequately represents the confusing complexity of real events. Reality is never so tidily "real" as when dressed up and dished up as a story!
But there are many theories; some are inspirational, some are schematic. I'll try to collect a few of them here. Also, don't forget to check out my rules for making cuts, and my list of pairs of stock characters
Grapple with a problem in stages.
(I like this the best!)
"The theatre must start to take its audience seriously. It must stop telling them stories they can understand."
"Stories are not about what is good or evil, but about good and evil. A story has both aesthetics and ethics as a complementarity, if I may use such a word. But in addition, stories have a third inexplicable element, something that produces a kind of leap within us and moves outside or within the ethic/aesthetic problem. And here it is not about "beyond good and evil," but a quite different problem, a problem which in a sense lies ahead, is more fundamental; and this completely different level concerns our powers of imagination.
"Stories then, are essentially about giving people new eyes so that they can see the world in a different way."