How I put together a story depends on a fair number of things. The last story for level two, well, that was raw emotion that basically came gushing out of me. There's really no character development and there's not much of a plot, per se. It was awfully therapeutic, though, and I'll never reveal why I wrote it.

Must protect the innocent, you know. I will say that it is the basis for a novel I'm working on and hope to actually finish.
For short stories, I tend to get an idea in my head, mull it over for a day or two, then just write. I have a fabulous proofreader, who never backs away from telling me where I've messed up and where I can do better.
I have hated outlines ever since I learned they exist. Even for projects like my senior honors thesis (The Role of Religion in the Indian Captivity Narratives of Early Colonial New England -- how's that for sounding stuffy and self-important?), when I had to come up with an outline, I knew I wouldn't stick to it.
I recognize the need for some sort of notes or basic rough outline if I'm going to write something longer than about 1500 words. So, yes, I've been jotting notes about character backgrounds and how I want the story to unfold for My Great American Novel. I can visualize certain scenes in my mind already and I have a tendency to write stories out of order, just so I don't lose some fabulous dialogue or description.
I write when I'm alone, 99% of the time. It's a very personal thing for me. I remember finishing my senior thesis and holding the printed out pages for the first time. It felt like a part of me. I'd never felt that way before about anything. I'd like to feel it again.