An allegory is a moral tale in which the characters are abstract concepts personified.
The pardoner uses allegory in having characters called the "rioters" (in other words, sinners) go up against a character named Death. They hear Death has been ravaging the countryside with the plague and decide they will find and kill him. Thus, two concepts, sin and death, are squaring off.
The tale is often understood as illustrating how greed leads to death and damnation, as the rioters end up killing each other through greed rather than killing Death. However, from the start, the rioters exhibit other sins. For example, they are proud (one of the seven deadly sins) and reckless in thinking that they can defeat Death, a foe who has recently cut down thousands of people. This lack of humility is the beginning of their undoing. They also "swore with appetite" to be true to one another, indicating that their thinking is rooted in the carnal or physical aspects of the world, not the spiritual.
We see their pride in play almost immediately as they travel onward and meet a humble old man. The proudest of them says,
What, old fool? Give place! Why are you all wrapped up except your face? Why live so long? Isn’t it time to die?
This sets us up for a story not about individuals but about archetypes—sinners—paving their own road to hell.
The Pardoner also cues his audience to expect allegory by cynically stating this is a story he uses to soften people up to give money and by opening with a quote that states love of money is the root of all evil.