Sir Gawain and the Green Knight takes place in the days of King Arthur, during Christmas festivities. Arthur, his queen and his knights are gathered at Camelot to celebrate. When the meal has just begun, an enormous knight enters the hall on his horse. Besides the fact that the man is impressive in size and appearance, something else causes the company to stop in amazement:
Men sat there gaping, gasping
at his strange, unearthly sheen,
as if a ghost were passing,
for every inch was green.
Not only is the man green, but also everything he is wearing is the same color. Even the Green Knight's mighty horse is green. The guest offers a challenge: a "stroke for a stroke," or rather, a blow for a blow.
The Green Knight challenges any of the knights gathered at the table:
I’ll stand like a tree trunk—he can strike me once,
if you’ll grant me the right to give as good as I get
All the Green Knight wants is the right, in one year's time, to return the blow. Gawain is young and eager stand to face the knight in Arthur's stead. He agrees with the terms, rises, takes his weapon, and cuts off the giant green man's head. Unfortunately, while Gawain may well have believed this an easy match to win, the Green Knight is enchanted: he gathers up his head and reminds Gawain of his promise.
Sir Gawain, have a care
to keep your courage for the test,
and do the deed you’ve dared.
You’ve begun: now brave the rest.
Then he departs.
The year passes, and as the Christmas holiday approaches, Gawain is saddened, knowing he must keep his word and preparing to meet the Green Knight and his death. Everyone around him tries to entertain him to keep his mind from what lies before him. Gawain gathers his gear, climbs on his horse, Gringolet, and travels a far distance through unknown lands to the prearranged location, but arrives early. Anxious for shelter and human company, he prays. Nearby, in answer to his prayer, he finds a wondrous castle. Knocking at the gate, the porter—and all the servants—welcome Gawain, inviting him to stay as long as he would like.
The castle's lord and his lovely wife invite Gawain to be their guest, and with time on his hands, Gawain agrees. The lord and his lady are the kindest and most generous of hosts. They lavish fine food, drink and quarters upon Gawain, knowing that he can only remain until he must leave to fulfill an obligation (though he never specifically tells his hosts what that is).
Gawain's host prepares to go out hunting the next day and plans to leave Gawain with the lord's wife so the young knight might rest. His host asks Gawain if he will agree to share whatever "chance" (or luck) might deliver to Gawain that day, and the host will do the same. Gawain agrees. The next morning the host leaves for the hunt. As Gawain sleeps, the host's wife enters Gawain's bedroom. He is a complete gentleman, and when the woman finally leaves, they share an innocent kiss, with a wish by each that Christ will care for the other.
For three days, the host goes out hunting. Each morning, the host's wife visits Gawain. And although she tries to seduce him, he receives kisses, which he then shares with his host at knight, and the host shares some part of the wild game he captured on the hunt that day.
However, on the third day, the young woman gives Gawain a beautiful belt (or girdle) that is magical: whoever wears it cannot be harmed. Gawain takes the belt, but he does not tell his host about it.
When the time arrives for Gawain to leave, he thanks his hosts and departs to face the Green Knight. When he meets the giant, he does not realize that this was his host for the last several days. The Green Knight takes a swing, but Gawain turns, sees the blade and flinches. The Green Knight stops and scolds Gawain for being fearful and dishonorable: for Gawain owes the Green Knight a free swing, as he swore to give him a year before.
The Green Knight swings again: this time Gawain does not move, but the Green Knight stops. The third time the Green Knight takes his swing, he delivers a slight cut on Gawain's neck. With the shedding of Gawain's blood, the young knight's promise has been fulfilled—Gawain is ready to fight the Green Knight now in earnest.
As the Green Knight explains his actions and calms the young knight, Gawain realizes who the Green Knight is—Gawain's host! The Green Knight swung the axe but did not harm Gawain because the young knight had kept his promise at the castle, giving back to the host the kisses the host's wife had given him. However, Gawain had felt guilty in facing the Green Knight because he wore the magical belt (or girdle) he had received from his hostess, something he had taken dishonestly—for he had promised his host to share with him what Gawain received during the day. With the belt he had failed to do so. Gawain gave in to his fear. The Green Knight tells him:
An honest man
Need never fear.
The Green Knight does not blame Gawain for keeping the belt, understanding that the young man wanted simply to save his life. He admits that he knows all that went on between Gawain and his wife—that he was testing him, and Gawain had been honorable in all things...except for the belt.
However, Gawain, a true and honest knight, feels horrible about his lie. In this way, Gawain failed the test: he valued his life over his honor. He asks the Green Knight to forgive his sin, which the other knight does without hesitation, giving him the green belt to keep. Upon returning to Camelot, the other knights also wear a green belt to honor Gawain.
We might see that the belt symbolizes sin, in general, for the theme of Christianity is prevalent in this epic poem. However, specifically, we can safely assume that the belt symbolizes weakness or fear.
According to the Green Knight, Sir Gawain passed the test even though he had not given the man the green girdle. However, the Green Knight found Sir Gawain a worthy adversary and quite brave since he did honor his promise and seek out the Green Knight per his agreement.
Sir Gawain was embarrassed about his own misconduct at not having given the girdle, so to remind himself, he wears it on his uniform. His men are proud and supportive of him. Therefore, they wear the girdle on their own uniforms as part of their uniform to demonstrate their support.
The girdle symbolizes the sin that Sir Gawain had committed when he did not give the girdle to the man. He knows he was wrong and a knight is supposed to be honest and chivalrous; therefore, he wears the girdle to remind him of his sin.
In Sir Gawain and the Green Knight, Sir Gawain technically fails the test of his loyalty. The Green Knight forgives Sir Gawain and passes him, because Sir Gawain only faltered out of misplaced courtesy. Gawain accepted a green girdle from his host's wife (not realizing his host was really the Green Knight).
On realizing his error, Sir Gawain is embarrassed at his mistake. He tells the knight he will wear the green girdle as a reminder "of the fault and faintness of the flesh," so he will never be so weak again. When Sir Gawain returns to court, he tells the tale of his shame. While everyone finds it all amusing, they accept that Gawain will continue to tie the green lace on his arm. In a kind show of solidarity to their somewhat determined friend, they decide to wear green baldrics in honor of this moment.
For Sir Gawain, the green symbolizes his failure, but for the rest of the court, they display the green to symbolize their loyalty and connection to their friend.