The book is set in two time frames - one in 1985, one in 1958. Both time frames have the same main characters - 7 children/adults and IT. Also, the book is set in Derry (Maine), for most of both frames. Derry has a bleak history - its murder rate is higher than it should be, and once every 27 years or so there is a period when there is a spell of brutal murders. The spell usually ends with some particularly dreadful accident, which tends to kill a lot of people.
The children meet up in the summer of '68, forming the Loser's Club. True to historic cycle, a wave of freak murders hits Derry, and each of the childrenhas a supernatural encounter with what turns out to be the killer - IT. IT usually manifests itself as a clown, by the name of Pennywise (or Bob Gray), lures its victim into a private place, and murders them - usually eating parts of them as well. IT usually kills children, as it relies on their imaginations - sometimes it just appears in the form of whatever the child fears most.
All of the children survive their first encounters with IT, but are reticent to tell any adults for fear of disbelief. They do have the courage to tell each other though, and gradually realise that there is some supernatural force which has brought them together, with the aim of killing IT. The supernatural force is some sort of giant turtle. They spend much of the summer together in The Barrens, a wasteland in Derry, and gradually learn more about IT's characteristics. They learn that IT has been in Derry for millions of years, and is alien to the Earth.
In one confrontation at a house in Neibolt Street, IT is injured by a silver ball fired at IT with a catapult, and it swipes at one of the children with a claw (IT being in werewolf form) and gashes him, not seriously though. IT retreats back to its lair in the sewers.
Another factor the children need to consider at all times is that of Henry Bowers and his gang. They are three more children who chase the children and fight them at every opportunity, and are gradually affected by IT's influence. They chase the children into the sewers one afternoon, and whilst the children try to find IT to kill it, they follow, only to be chased in turn by IT. One of them is killed by IT, and Henry himself is driven totally insane by the sight of IT.
Our heroes, meanwhile, eventually find a small door, deep, deep in the sewers. They tentatively open in, and once inside see IT in the most accurate way their minds can handle - as a giant spidery-type creature. They see quickly, however, that IT is both female and pregnant. Bill Denborough, the leader of the Losers Club, engages IT in The Ritual of Chud, a legendary way of defeating similar beings, involving the two adversaries biting on each others tongues, and telling each other riddles. The loser is the first to laugh. Well, that's how it was in ancient times, anyway. Bill mentally bites IT's tongue, and she tries to drag him into her "deadlights" - an ill-defined place, but one it's definitely not good to be in. She is in great pain all this time - Bill is obviously doing some damage by holding on this long. When he realises roughly what's going on, though, he lets go (with difficulty) and the group retreat, hoping the wounds are fatal. They form a pact that if IT isn't dead, they'll come back and face it again.
Well, surprisingly enough, IT isn't dead. 27 years later, when all but one of the group have become famous and rich (the one who stayed in Derry, Mike Hanlon, didn't), there is another wave of killings. Mike notices these, and after a time, decides it is time to call in the other members of Lucky 7 - the Losers Club. The other six don't remember much about it at all - although one of them remembers enough to decide that suicide is better than going back to Derry. The other five, however, do make it as far as Derry, and gradually start to remember more and more.
Meanwhile, an uninvited guest is making his way to Derry... Henry Bowers has escaped from the Juniper Hill mental institute, and, guided by IT, tracks down our heroes...
The six meet for dinner, and some decide they can't face the idea of facing IT again. They are persuaded, however, by a sequence of bizarre events, one of which plays havoc with the library, and finally convinces them that things are not how they would like. Henry Bowers confronts Mike in the library, and hospitalises him (although Mike manages to kill Henry in the hotel, after Henry attacks Eddie). This makes our now diminished group of heroes even more determined to kill IT.
They go back into the sewers, this time chased not by Henry, but by the husband of the sole female member of the gang. After a tough hunt, they manage to find IT, and confront her once more. This time they manage to make absolutely sure that they kill IT (it's not worth even trying to describe how they kill her) and her death has interesting effects on the town of Derry. Most of the town starts subsiding, and various people die in amusing circumstances...
But what of our heroes? Well, each of them finally leaves Derry, and totally forgets anything that happened. (It's not as weak an ending as it sounds!)
This was the book that finally convinced me that Stephen King was a total genius (admittedly I'd only read Christine before - good, but not in the same league). It really is a must - although it's worth trying to keep a grip on reality, or you may find your speech mode slipping into those of the children... Beep beep, Ritchie!