How does Fitzgerald convey Nick's role in the Great Gatsby?
Through a confession in chapter 1 (regarding his father's advice) and the party in chapter 3 (in which he meets the "incurably dishonest" Jordan Baker), Nick says:
Every one suspects himself of at least one of the cardinal virtues, and this is mine: I am one of the few honest people that I have ever known.
Thus, Fitzgerald establishes Nick to be:
an unreliable narrator: Nick obviously thinks he's better than he really is. His hubris lies in his false ideals regarding himself and Gatsby. He only sees the good and the possible, the flaw of most romantics. If Nick is so honest, why is he complicit in all the lies and affairs that Tom, Gatsby, Daisy, and Jordan indulge in? The fact is that Nick is not honest, and any statement otherwise is self-delusion.
an observer-participant: Nick mainly observes and subtly critiques the social mores of Buchanans and Gatsby. He's like a fly on the wall in most chapters (the parties in chapter 1-3 especially). At other times, he participates, such as arranging the date between Gatsby and Daisy in chapter 5.
an ally of Gatsby: Nick says he's not on a side, but he clearly disowns the Buchanans by the novel's end. To Nick, Gatsby is the ideal American, full of hopes and dreams, a rags to riches story, a reinvention of himself. Nick wants to be like Gatsby, but he's too self-righteous. So, he lives vicariously through him.