Every story has a narrator, who presents the action from a particular, identifiable point of view.  The narrator may be a character in the story who speaks in the first person.  More often, the narrator views the action from a vantage point outside the story, speaking in the third person.  When such a narrator seems to know everything about all the characters, he may be called omniscient.  Sometimes a narrator will seem to know everything about only one character, or perhaps two, offering a kind fo selective omniscience.  The narrator allows us to feel the impact of event on certain characters as if we had complete access to their minds.

Reaske, Christopher R.  Mirrors: An Introduction to Literature. 3rd ed.  New York: Harper and Row, 1988, 161.
 

In literature, point of view refers to who narrates a story and how much that narrator knows.  In a story told from the first-person point of view, the writer chooses to have a character within the story narrate it, using the first-person pronouns I and me.  This method of storytelling lets the reader see and know only what that character, the narrator, sees and knows.

Literature and Language: English and World Literature.  Evanston, Illinois: McDougal, Little & Co., 1992, 153.
 

    When planning a story, an author usually chooses between first-person point of view, in which the narrator is a character, and third-person point of view, in which the narrator is not a story participant.
    Third-person narrators can be classified as omniscient or limited, depending on how much they know.  In the omniscient point of view, the narrator is all-knowing and so can describe every character's thoughts.  By contrast, a narrator in a third-person limited point of view possesses limited knowledge, often confined to one or two characters.

Literature and Language: English and World Literature.  Evanston, Illinois: McDougal, Little & Co., 1992, 615.