Form refers to the structural and organizational elements of a work of fiction.
Malamud may be suggesting that literature is a way of organizing our experience into a coherent and meaningful narrative. Anyway, this is one inference we can draw from his statement.
Here are two ideas for looking at form:
Assess the story in terms of parts. Identify a theme developed in each section or part of the book and analyze the relationship of the parts of the story. The questions you will be asking here are: What theme is presented as the novel's central problem in the first section? How does the beginning of the book relate to the middle and to the end?
Look at the WHO and the WHERE of his characters. In Malamud's work, characters are sometimes representative of a single idea - innocent suffering, political indifference, etc. - and the placement of the characters in the story corresponds to the development of the work's central ideas. A brief chart could help you with this analysis, asking: What idea defines each character? How do these ideas relate to the action of the story? How do these ideas fit with the theme of the section in which the character appears?