Separate Scene Storytelling

Stories being told, read, or testified are often shown as separate scenes from the rest of the work.

This is because while it's often okay to just see someone telling these, or point the camera at a page (and thus this does not run into Show Don't Tell), doing it for too long would just grind the action to a halt (or even be longer than the work trying to tell the story). Thus seeing the story being acted out keeps the story entertaining within the work.

What is being told can vary. Anything from an original story within the show, a Public Domain book, a poem, a or ghost story, a letter, or giving a testimony in court.

While these scenes can involve a separate cast from the main work, they can also involve a Universal Adaptor Cast.

Characters to whom the story is being told, may do some Leaning On the Fourth Wall as they often understand and talk about elements from the visual scene never actually mentioned by the story-teller. This may be due to bad writing, or done intentionally for laughs.

This can overlap with: Dream Sequence (if someone falls asleep when a story is told), Flash Back (when the story being shown is something that happened in the past), Framing Device (if the story being shown is the main point of the work).

A Super Trope to Rashomon Style.

Compare Deep Immersion Gaming, Imagine Spot, Cutaway Gag.

Anime and Manga

 * Pokémon, in the Victini and Zekrom/Reshiram movies: The story of the two princes and the dragons is told in-universe with an elaborate pop-up book, but is mostly shown to the viewer as separate scenes.

Film - Animated

 * Some of the earlier Disney Animated Canon films began with a Storybook Opening.

Film - Live Action

 * The Princess Bride: When the grandfather starts reading to the child, the action changes to the story.
 * The film version of Harry Potter uses this for "The Tale of Three Brothers" section.
 * The 1995 film adaptation of Les Misérables was set in France during the Nazi occupation, and the main characters, inspired by acts of heroism from the novel, would play out their own lives as if they were the characters. This meant some sequences of the novel would be dramatically played out on screen (with the actors from the Nazi era playing the characters), some scenes where the action in the 1930s paralelled events and actions from the novel, and other ways as well.

Literature

 * The Neverending Story played with this. It looked like it was only this at first, and then it turned out the story wasn't just a story.

Live Action TV

 * A Moonlighting episode did this as a framing device to make an Affectionate Parody of The Taming of the Shrew. A kid wanted to watch the show, but he had to read the play for homework instead, and imagined it with the Moonlighting actors playing the roles.
 * The Suite Life On Deck: has the cast doing a wackified retelling of Robin Hood -- one part story, one part dream that The Ditz is having from having dozed off in class.
 * Technically the whole of How I Met Your Mother is this trope, but there are also numerous internal examples, some where the whole episode is a story someone's telling.
 * Happy Days: Several examples, including one where Richie's great-uncle tells him about his cousin, who was a crusading DA trying to shut down speakeasies in 1920s Chicago. Richie plays the DA, Mr. C plays the speakeasy owner, Mrs. C plays a Carrie Nation type, Al is the Dumb Muscle for the local gangster (Fonzie), etc.

Newspaper Comics

 * FoxTrot does this for stories the characters attempt to write. Many of these attempts fall under Her Codename Was Mary Sue, especially the Trope Namer arc.

Theatre

 * Man of La Mancha does this for most of the film, with the characters acting out the tale of Don Quixote in jail and that cutting to seeing them all in the desert/inn/house they were pretending to have.

Western Animation

 * Adventures From the Book of Virtues is an example of this being used once or more per episode. Every episode has the animals telling the kids a classic story that accompanies the episode's virtue, whether it is a fairy tale, a folk tale, a tall tale, a fable, or a myth.
 * A later season Alvin and The Chipmunks episode did this with Treasure Island (although it was very lose with the plot). There was a blackout, and Dave read them the book while the power was out. The scenes were the chipmunks playing three of the characters, but with the rest of the roles being original people.
 * The My Little Pony Friendship Is Magic episode "Read it and Weep" had Rainbow Dash recuperating from a broken wing, and passing the time by an adventure novel based heavily on Indiana Jones and pulp adventure books. While she read, we saw the scenes of Daring-Do searching the jungle for treasure.
 * The X-Men series episode "Jubilee's Fairy Tale Theater" was about Jubilee telling kids a story while they waited to get rescued from a cave-in. It cut to the X-Men in roles in a fantasy adventure.
 * Phineas and Ferb: "Excaliferb" is an Homage to The Princess Bride and a spoof of the King Arthur Excalibur story. Carl tries to Self Insert but Major Monogram calls him out for it and won't let him continue unless he reads it properly.
 * This occurred in the Garfield and Friends episode Badtime Story with several characters reading a parody of Chicken Little.
 * Parodied in this U.S. Acres Quickie.
 * An episode of Daria was about Daria trying to write a story for class, and her attempts were shown this way, ranging from a Shout Out to The Graduate, to a Jane Austen spoof, to a future Daria hoped would happen.
 * In "Lyle the Kindly Viking", a Veggie Tales episode, Archibald Asparagus begins reading the story from a pop-up book before the view zooms in and we see the story fully animated.