Three-Act Structure is a way of structuring a movie, stage play or novel that can be found in many stories (and even some songs). It helps the audience orienting themselves in the storyline and keeps their interest.
Act I (the Setup) is used to hook the audience and introduce the protagonist, the antagonist and the major conflict/problem/mission of the story. It also establishes the locale and the mood and conventions of the story. Act I takes up approx. 1/4th of the story.
Act II (the Confrontation) forms the main part of the story and takes up at least half of the entire story. Here, the protagonist finds himself in a cycle of struggles and complications on his way to the solution to the original problem.
In Act III (the Resolution) the conflict/problem is solved and the story comes to a narrative closure. This takes up a maximum of 1/4th of the story.