Gawain decides that if anyone is gonna get their head chopped of in this game, it should be him because his life would be least missed, so he accepts the rules of the game.
"Let the King step down / And give Sir Gawain the game!"(lines 146-147).
Gawain takes one swing of the ax and slices the Green Knight's head right off. The Knight then picks up his head and walks out.
"And then, swiftly, he slashed at the naked neck" (line 154).
The deal that the lord made with Gawain was that they shared everything they received that day. However Gawain did not share the sash that he got because the lords wife told him to keep it between them.
"When the lord returns at the end of the third day, Gawain gives him a kiss but does not reveal the gift of the sash"(217).
The green knight stops before chopping his neck and suggests that Arthur's knights aren't so great as they are portrayed as because Gawain flinches as though hurt before he was even struck.
"And his shoulders jerked away from the iron a little, / And the Green Knight caught the handle, holding it back" (lines 259-260).
Since Gawain had the green sash, he was protected from the Green Knights swing of the ax. All he had was a small nick on his neck.
"But hard as he hammered it down, it hurt no more / Than to nick the nape of his neck, so it split the skin" (lines 333-334).
The Green Knight reveals himself to be the lord, and because Gawain never told him that he was given the green sash, the Green Knight actually swings the ax at his neck because he knows that the sash will protect him and because Gawain didn't follow the deal.
"You failed me, though, on the third / Exchange, so I've tapped you here"(lines 348-349).