The statement that correctly 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 within the story and uses "I" or "we," while in third-person narration, the narrator exists outside the story and uses "he," "she," or "they."