Situation is the hot mess, the bubbling soup you throw your character into. What kind of nasty circumstances are you going to make your poor protagonist face?

For example, in my middle school novel Iggy’s World, I wanted to write about a kid who was still into bugs when no one else was. So, what situation could I throw him into? I settled on making him a member of a (sort of) famous family who creates a sci-fi web series, with characters based on his bugs, like his praying mantis.

But that’s just the situation, the hot mess I threw him into. The plot grows from that, but, to be clear, situation is not plot. Again, situation is the circumstances that you toss your character into. Plot is how the character acts on his goals within those circumstances.
 
For example, Iggy’s goal is to get his family’s attention. He starts a podcast on bugs with that aim, and to gain fame he exposes his sister’s fears, which leads her to get even, which leads him to get even … Now I have the start of a plot. For a description of the difference between situation and plot, see the link below.
 
When working on a short story, weeks and sometimes months of effort will ride on the decision of what circumstances we chose to work within for a given project. When we’re working on a novel, we may be talking much longer. We’ll have to live with the decisions we make when it comes to situation for a very long time.
 
If the situation does not afford adequate opportunity for conflict -- in other words, if you haven't put your characters in a big enough pickle -- then you'll run into real problems trying to keep up momentum and the story may fall flat. That goes for the big picture, the project as a whole, as well as for individual scenes or chapters.
 
For example, if, for a given scene, the situation you put your protagonist into is researching in a library or going on a museum tour, then your reader is likely to snooze as they wait for something interesting to happen. On the other hand, if your protagonist is suddenly beamed aboard a spaceship as they are sitting in that library, the reader will sit up and wonder what’s going to happen next. Maybe lose the library entirely and just beam that character up, Scotty.
 
So, how to test if a situation is going to work? The question to keep in mind is, “Is there opportunity for escalating conflict in this situation?” In Iggy’s World, I put Iggy into a situation where he created a podcast, which allowed me lots of opportunity for him to embarrass both himself and his (sort of) famous sister and get them both in (escalating) trouble. Iggy podcasts his sister’s fear of spiders. When she drops his pet tarantula, he gets even. Then she gets even … and the conflict builds. You can see how the plot of Iggy’s World arose from the initial circumstance I put Iggy into. If he didn’t have pet bugs and a famous family to try to impress, and didn’t start a podcast, I wouldn’t have a story.
 
I also look for opportunity for physical action in the situation. Too often our situations involve characters sitting and talking, very often about events that have already occurred. A little of that is fine, but apprentice writers tend to rely too heavily on “talking head” or “therapy” situations where characters are seated and not moving around much. Very often the character’s school or workplace offers those dynamic situations we’re looking for (though, again, sitting in a class listening to a teacher isn’t always the most dynamic situation for a scene).
 
A protagonist must meet challenge after challenge of increasing intensity heading towards that climax, and one thing must flow naturally and logically to the next in a causal chain. Deciding on a strong situation or set of circumstances to put your protagonist in is the starting place.
 
What to know more? Here's Situation V. Plot.