Full spoilers follow.
The setup as deception. Jake Sully is on Pandora only because his identical twin, an avatar driver, was killed — the program's investment is in the genome, not the man, and Jake is accepted as an interchangeable part. Quaritch recruits him immediately as an intelligence asset, dangling the operation that would restore his legs in exchange for reconnaissance on the Omaticaya. Everything Jake learns in his first months among the Na'vi is therefore stolen: his video logs are a spy's field notes, and the audience is complicit in enjoying the education while knowing what it is for.
The turn. Jake's initiation, his taming of an ikran, and his union with Neytiri under the Tree of Voices complete his conversion at exactly the moment his intelligence becomes actionable. The mapping he provided identifies Hometree as sitting atop the richest unobtanium deposit; Selfridge authorizes the assault, Jake's plea for time fails, and his confession to the clan — that he was sent as a spy — costs him everything. Hometree falls, Neytiri's father Eytukan is killed, and Jake and Grace are cut from their links and imprisoned. This is the film's structural genius and its cruelty: the hero personally supplies the weapon used against the people he loves.
Grace's death and the proof of Eywa. Freed by Trudy's defection, they flee to the Hallelujah Mountains, but Grace is shot. The Na'vi attempt to transfer her permanently into her avatar at the Tree of Souls, and she dies mid-ritual — but not before saying she is with Eywa, and that Eywa is real. Her death converts her own scientific thesis, that the forest is a vast neural network storing information, into demonstrated fact. It is the film's key retroactive reveal: the Na'vi religion was accurate biology all along, which means Eywa can be appealed to, and can answer.
Toruk Makto. Outcast and disbelieved, Jake regains standing by bonding with the Great Leonopteryx — the apex predator whose riders, by legend, number only five in Na'vi history and who are remembered as those who united the clans in times of crisis. Riding the Toruk into the refugee camp is a theological argument, not a military one: he arrives as prophecy fulfilled. He then prays at the Tree of Souls, telling Eywa what happened to Earth and asking her to intervene — and is told by Neytiri that Eywa protects only the balance of life, taking no sides.
The battle and the ending. The Na'vi alliance attacks the human bombing fleet and is losing badly when Pandora's wildlife — thanators, hammerheads, viperwolves — attacks en masse. Eywa did answer; the balance itself intervened. Trudy dies attacking Quaritch's ship. Quaritch destroys the shuttle carrying the bomb load only after Jake and Trudy set it off, then hunts Jake in his AMP suit, tears open Jake's link shack and exposes his helpless human body to Pandoran air. Neytiri, saved from the suit by a thanator, kills Quaritch with arrows and reaches Jake's suffocating human form with an exopack. In that moment she sees him — the frail human body, for the first time — and says 'I see you.' The film's title phrase resolves not as romance but as recognition of the true, unlovely self behind the borrowed one.
The final transfer. The surviving humans are expelled from Pandora, and the Na'vi perform at the Tree of Souls the ritual that failed for Grace. It succeeds for Jake: his consciousness is moved permanently into his avatar, and the film's last image is his Na'vi eyes opening. The final line of narration — that it is his birthday — makes the meaning explicit. The 'avatar' was never the fake body; the human one was the vehicle he was assigned, and the film ends by discarding the original.
What becomes clear afterward. On rewatch, the early scenes read differently: Grace's hostility to Jake is professional grief for a program she knows is being weaponized; Mo'at's 'it is hard to fill a cup which is already full' is a prophecy about the humans as a species; and the woodsprites that stop Neytiri's arrow in the first forest sequence were Eywa's selection of Jake before he had done anything to deserve it — which is either the film's most beautiful idea or, depending on your reading, the exact mechanism of its white savior problem.