Point of view (POV) is the perspective from which the story is presented, the way you allow your readers to see and hear what's going on. It determines the amount and kind of information the reader will be given.
First Person POV
First person point of view is probably the most natural voice to use because you use it all the time in your everyday life. Whenever you tell somebody about something that happened to you, you use the "I" of the 1st person.
The advantage of this point of view is that the reader gets to hear the thoughts of the narrator and see the world of the story through his or her eyes. However, your readers will also share all the limitations of the narrator. They can only see and hear what the narrator experiences.
The narrator of a first-person story is a character within the story and therefore limited in understanding. He or she might be an observer who happens to see the events of the story, a minor character in the action, or even a protagonist.
Second Person POV
Second person POV is the most difficult POV to write from and is seldom used. In this POV the author speaks directly to the reader using “you”. In essence, the author invents a fictional character and then invites the reader to become that character.
Here’s an illustration:
You are not the kind of guy who would be at a place like this at this time of the morning. But here you are, and you cannot say that the terrain is entirely unfamiliar, although the details are fuzzy. You are at a nightclub talking to a girl with a shaved head.
~ from Bright Lights, Big City by Jay McInerney.
Second person POV is meant to draw the reader into the story, almost making the reader a participant in the action.
Third Person POV
Third-person point of view is that of an outsider looking through a window at the story. The author uses "he," "she," or "it” and is narrating the story. There are three basic types of third person POV: omniscient, limited omniscient, and dramatic.
In the omniscient POV the narrator can home-in on a scene and on the viewpoint character in particular, showing us the events through the character's eyes and letting us hear their thoughts. We are told everything about the story, including the thoughts and feelings of all the characters, and even information that none of the characters know.
In limited omniscient, we are told the thoughts and feelings of only one character (rarely more than two characters). We do not know what is in the minds of other characters.
With the dramatic POV, we are told only what happens and what is said; we do not know any thoughts or feelings of the characters. It is called "dramatic" because it includes the words and actions, just as though you were observing a play or film.
In epistolary novels, the entire story is told in the form of letters, written from one or more of the characters to other characters. Their greatest strength is the strong sense of realism that they create.
These days letters have unfortunately gone out of fashion - both in the real world and in fiction - but it is possible to put a modern twist on the concept by substituting e-mails, or even text messages for letters.
If you’re not sure what POV to use, try them all. If it works, it works. And if it doesn't, you can always reshape it into a more traditional form later. The great thing about writing a novel is you can always change your mind.