Our hero, the narrator, has been harassed by the old man's eye for too long (though we don't know how long). So, the narrator decides to get rid of the man, to get rid of the eye. Now the narrator has something to look forward to. His/her "energies have found a focus," which is what Booker says this stage is all about.
The narrator really enjoys the whole process, the waiting, the killing, and the cutting up of the body and hiding it under the floorboards. In fact, the narrator seems to be getting away with his scheme.
The police arrive just a few minutes after the narrator has hidden the body, but that's not the problem. They seem to suspect nothing. The problem is the ringing in the narrator's ears that just keeps getting louder. This ringing is what Booker calls "a shadow figure" – a mysterious form (in this case a sonic form) that "threatens the hero."
The situation is now slipping out of the narrator's control." The mysterious sound is keeps getting louder and louder and louder, but nobody else seems to hear it.
Here's where the story doesn't quite fit the tragedy mold: the narrator doesn't die, but instead condemns himself.