Okay, so here is how it goes:
Someone will say a sentence, and it is part of the story.
You have to add a sentence to keep the story going.
Say what happens next, or conclude the story, do whatever and have fun! :D
Example:
Person 1: There once was a turkey named Bob.
Person 2: He was always afraid of being eaten for Thanksgiving.
Person 3: But Bob's brother, Carl, took him to a turkey psychiatrist and he was diagnosed with Geteatenphobia.
And so on....
I'll start:
Once upon a time there was a princess who lived in a beautiful castle, but she held a dark secret.