(Dedicated to Ekko, who asked about this issue in the "Simpspin" opinions thread.)
What does it mean?
Basically, that as a writer, you should strive towards implicating your reader in the story by showing it to them in enough detail to be interesting, so to speak, not by telling them how to feel/react/think. Or, to put it another way, you should present your case and let the reader think for himself. Readers are usually a little brighter than writers give them credit for.
This works on a multitude of levels, from descriptive detail to the theme of the story itself. I'll try to pin down a few categories in which this rule is really golden.
When does it apply?
The most basic case of Showing v. Telling is in the choice of words. The following example I got from a writing course:
He walked quickly across the room.
This sentence is adequate, i. e. it gives us the picture the author intends, but it could be more elegant, because at the moment the author is simply telling us something, "the man walked", and then qualifying the colourless "walked" with an equally colourless adverb. Whereas, in:
He paced across the room.
the verb itself doesn't need qualification, and is more expressive than "walked quickly".
This goes back to the discussion of adverbs. Adverbs tend to be words of telling rather than showing, thence the opinion of a class of critics (such as me) that they belong in academic or technical prose, but only to a small extent in fiction, whose aim is to show the reader something, not tell him how to see it.
The forest was beautiful. It was the most beautiful forest they had ever seen.
The trees were white-barked like birches, but so tall their bending branches formed strange domes and naves. Their foliage was a web of gold, but yet the air was scented with spring.
(My own example, purely verbally, but anyone who knows my tastes in reading can tell which forest it is. )
OK, it stands to reason that scenery (and people, and things) should be described. (Though sometimes vagueness is more evocative, and overdone reams of description isn't good. For some hints on description, see my "The Way the Glue Tasted" column. Plug, plug.) As important to remember is that the reader wants to think for himself, and figure out the state of things by being given the details, the way you have to in real life. Contrast
The house looked abandoned.
Every window was broken. The flowers in their beds were withered crisp and unrecognisable, and some tiles had slid off the roof and smashed on the porch.
The second description doesn't state that the house was abandoned, but the reader can figure that from the description, the way you could if walking past the same house.
OK, outer descriptions are pretty easy. We've most of us seen beautiful forests, or derelict houses, or whatever. However, putting the right words on feelings or emotional states is as important... and, to quote Beelzebot in the final Futurama episode: "You can't have people announcing how they feel all the time! That makes me feel angry!" Contrast
He got violently angry.
He had to grab his right hand, as if it would smash something.
Again, you shouldn't go overboard with the purple prose, but a valuable piece of advice (which I got from the Writers' Guidebook) is that the best way to describe an emotion is not to mention it by name. We've all been angry, or scared, or overcome with affection. We've seen how other people act while under these emotions. Use it.
Pointing a Moral and Adorning a Tale
The guards carried out the corpses. This was the catastrophe wrought by a man's ambition, a woman's lust and a youth's misguided revenge.
Hamlet by William Shakespeare
All fiction should try to tell us *something*. But if you can sum up the moral in one sentence on the last page, why not just write that sentence and save the rainforests?
This also goes for authorial comments in the middle of the story. If there is a moral dilemma, the reader can (again) usually see that, and make up their own mind about the right way to act. If the writer barges in to tell that someone is evil, or suffering bravely, or that a deed is horrifying or morally repellent, it tends to estrange the reader rather than to suck him in. If you write to preach, maybe you should consider another occupation.
(Another example: I recently played a text adventure, otherwise good, in which the player character found out a terrifying secret about herself. In a scene near the end, I had the people [manipulative, but not otherwise evil] who had messed up my mind cornered, and was holding a needle gun. I had a choice between getting revenge by shooting them, or dropping the gun and forgiving. If I shot, I got an ending in which the guards hunted me down, I lost all my score, and the game called me a villain. If I dropped the gun, the game went on and I got a point for learning the virtue of compassion. Hmm. Which was the morally right action?)
There are probably many more examples, but the above are the most important once to me.
When doesn't it apply?
As usual, no rule should be followed off a cliff. We don't need lines of description of everyday actions or settings, particularly if they're not important to the main movement of the story. A problem with showing is that it uses up more words than telling, and you shouldn't use it just to pad the story. As I said when speaking of descriptions, vagueness can be useful, for certain moods or certain types of story. And of course, the story is always told from the inside of someone's head. If the viewpoint character thinks that the person she's speaking to looks angry, say so.
But on the whole, I think the rule still holds.