The Green Knight rides into town seeking King Arthur. When he arrives he places a challenge on the floor, that you could cut his head off but in a year and a day he would get to do the same to you. Arthur volunteered to take his challenge but his nephew stepped in to protect him.
“Now if you, my worthy lord, said Gawain to the King, Would command me to step from the dais and stand with you there,
The King allows Gawain to take his place. The Knight and Gawain agree on the deal as the Knight gets ready. Gawain swings the ax chopping the Knights head off. (Which rolls around quite a bit).
"The sharp of the battleblade shattered asunder the bones And sank through the shining fat and slit it in two" (lines 148-150)
The Knight gathers his head and mounts his horse. He reminds Gawain about their pact, and how it would be dishonorable for him to go back on the deal. The Knight informs Gawain that he can be easily found and rides off into the distance.
"Come or be counted a coward, as is fitting. Then with a rough jerk he turned the reins and haled away through the hall-door, his head in his hand" (Lines 180-182)
Gawain begins his journey to the Green Knight. On the way he discovers a beautiful castle, and the Lord welcomes him to stay. They make an agreement that the Lord will go out each day and hunt, and when he returns they will exchange what they received.
"On the first two days accepts only kisses, which he gives to the lord at the end of each day in exchange for what the lord has gained in the hunt.
On the third day at the castle the wife offers a ring of gold which Gawain politley declines. She nexts offers a green sash which he also turns down, at first. Gawain later accepts the sash, but keeps it a secret from the Lord only giving him a kiss.
"When the Lord returned at the end of the third day, Gawain gives him a kiss but does not reveal the gift of the sash" (Lines 240-243)
The day finally arrives for Gawain to meet the Green Knight. As the knight goes to chop off his head Gawain flinches. So the Knight tries again only to barley break the skin of Gawain's neck. Gawain later learns that the Knight had set him up. He was in fact the lord and that was his wife. The Knight was seeing how loyal Gawain really was, which resulted in a friendship.
"I know, too, of your kisses and all your words and my wife’s advances, for I myself arranged them. It was I who sent her to test you.