The exercise is normally played in a circle.
One player walks to the centre of the circle and takes the physicality of an object, person or concept while clearly stating what they are.
Eg. I am a tree.
The group now consider what else naturally comes to mind that might be part of a scene with a tree.
Someone else enters to be one of these things.
I am a squirrel (running along a branch of the tree) [you can add detail or connections if you wish]
A final person enters and adds a third element.
I am the acorn the squirrel is running towards.
At this point the first improviser must exit the scene and take someone with them.
I'll take the squirrel or I'll leave the acorn (both are acceptable but be consistent)
The initial improviser plus the person playing the squirrel now leave the circle. The player that is left must restate who what they are but without context. Eg I am an acorn.
A new scene is created. From tiny acorns...
This is a very good exercise for Yes and... encourage students to think what would fit the world that is being created in the centre of the circle.
The best moves are the obvious moves, not the wildly creative moves. Remember that the very best improvisers are not constantly trying to be wacky and unique.
Audiences laugh for many reasons and a laugh of delight or recognition is as powerful as a laugh of surprise.
There is also something about this exercise that speaks to the need to support your scene partners. Don't leave people hanging. Get in there and make their ideas look GOOD.
You can also play a variation of this exercise where the first two items are conceptually poles apart and it is the third player that finds something that binds them together. This can be seen as a physicalised version of Ancient Poetry