The correct statement that explains the difference between first-person narration and third-person narration is:
In first-person narration, the story is told by a character in the story, and third-person narration uses a point of view from outside the narrative.
In first-person narration, the narrator is a character who uses "I" or "we," providing a personal perspective. In contrast, third-person narration comes from an external point of view, using "he," "she," or "they," and can be either limited (focusing on one character's thoughts and experiences) or omniscient (knowing the thoughts and experiences of all characters).