This was one of the first story activities that I ever read about, and I couldn't tell you who it was that originally taught or posted it. If you know, please leave the name in the comment section so that I can properly credit it. It's a very fun activity, but one that has the potential to be really crazy or a huge flop, so make sure that you consider the dynamic of the group that you use it with and lay out the expectations very clearly so that you don't leave class feeling like a flop or with a headache!! All that preface for this wimpy little explanation...
After you have finished asking a story or reading a text, divide the class into groups that have as many students as there are actors in the story. (Main actors + one-two people that can be various smaller roles throughout the course of the story; you could also add a director). Each group should assign parts (characters) to each of its members. You could do this for them by saying that the tallest student is Character X, the next tallest is Character Y, etc. (or the longest hair, biggest foot, one that can do the most push-ups, most letters in their name, closest birthday...blah blah blah). Then, read through the story as each group acts it out simultaneously. Instead of having one small group of actors at the front of the class, you have many small groups that are all acting it out at the same time. Give cheese awards whenever you see an actor really cheesin' it up (idea from Diana Painter here in Anchorage). You could also stop the action and have one group re-do a scene if it was really awesome.
This is a great way to get everyone involved!! Use it with stories that have lots of action and dialogue and little narration.