This game is based on a similar one called "Story Story Die" that one of my students brought in. It sounded like fun, but it struck me that it wasn't really a drama game, so I made some changes and accidentally invented a really fun new game. It is pretty simple, but the results are often anything but, and it can get as zany or as serious as you choose to let it.
How to Play
Group sits in a semi-circle around the acting area. (Any space will do--it needn't be very big.) Establish an order of play, as in a board game, so everyone will know whose "turn" it is.
The first player takes her place in the acting area. The second player begins to tell a story. The first player must act out the story as fully as possible, in whatever seems the best way. This can involve playing more than one character, using props--whatever she thinks will work best and with whatever limits the leader may choose to impose.
When this has gone on for a minute or so, the leader rings a bell. (Actually, I usually just yell "ding!") The first person sits down. The second person enters the acting space. The third person continues the story exactly where the second person left off, and the second person must now act it out.
After a minute or so, another bell, and another rotation. Continue until the story concludes or seems to peter out, or until everyone has had several turns as storyteller and as actor.
The beauty of the order of play is that each person must be the "actor" immediately after being the "narrator." This tends to prevent people from deliberately inserting difficult or embarrassing details to trip up the actor, since they know they will soon be on the receiving end.
My Middle School students love this game, and frequently request it.
You can put any sort of limits or guidelines on any part of the game. For example, I sometimes insist that the story "make sense" or that it be "serious." (Other times I let it get as silly as it wants to.) Sometimes I allow the use of a set store of props and costumes, while other times I require that everything be pantomimed. You can really go wherever you want with it.
With my playwriting students I play a version of this game in which they write instead of speaking. Each person begins a play, and when the bell rings (usually after three or four minutes) everyone passes her paper to the right, reads the new play and continues where it leaves off. After about three or four passes, I tell them to find a way to bring the play to a close. Then we share the results. Lots of fun, and it helps reinforce the idea that sometimes it is helpful and fun to write even if you are not "inspired."