Sir Gawain, an honorable knight, a year a go struck a deal with a green knight. The deal allowed for Gawain to cut off the head of the green knight if the green knight also be allowed to do so in a year.
Now, a year later, the green knight is ready to cut Gawain's head off. However, Gawain fears permanent death and so when the green knight prepares to strike; Sir Gawain flinches early.
What the reader finds out is that Gawain had an affair with the Lord's wife. The lord was also the green knight. This affair thus instilled guilt within Sir Gawain.
Finally, Sir Gawain stops flinching and decides to be honorable. The Green Knight consistently mocks Gawain for flinching if he is such an esteemed knight .He is still for the striking with an ax from the hands of the Green Knight.
When the ax is swung and has struck Gawain in the neck, it only left him with a nick which shed blood. However he was still alive and well.
This was because the wife whom Gawain was having an affair with gave him a girdle that protects him from all harm. allowing him to survive from an ax strike from the Green Knight.