If you are trying to sell a screenplay, you will often be asked to submit a "one-sheet" or one-page treatment. This is a description of the story that fits on one page, along with the title and contact information. Normally that means 500 words, and that will challenge you to condense your ideas accordingly.
Write a few notes to yourself about what your story is about. Go ahead and get philosophical. "It's about lies." "It's about how love can cure you." Your message can be cynical or positive, but be aware of what it is. You're going to have to cut out all kinds of important information to fit it into such a small pitch. Therefore, you have to have a focus to tell you what to zero in on.
One detail that many professionals use to help guide them here is to note what are the very first and very last actions in the story. (Or note what the very first and very last images are.) This is what the audience will come away with, and it's important to understanding the story.
Identify what is really essential. The three things that waste the most space in a synopsis are back story, secondary characters and secondary plot lines.
The back story and subplots are usually attached to a particular character, so the fewer characters you mention, the better. If possible, keep it to your main character, the protagonist, and whoever is providing the main opposition to him, the antagonist. There is a lot of debate over whether the antagonist is the villain or not. For the purposes of the short synopsis, the antagonist is the person who provides opposition to the main character throughout the story. Think of a love story, where the "villain" may be a minor character of a fiancé, but the main conflict is between the two romantic leads. In the end, the fiancé doesn't matter.
Write a rough version of your setup -- the character and his situation. Keep it under 100 words, less if possible. This will be kind of like the first 10 minutes of your screenplay, showing your character before the story gets going. Try to pick your details in ways that reflect the tone of the story -- funny, scary, dramatic.
Identify four sections of your screenplay. While standard screenplay structure is three acts, the middle act is very long. It will be easier to write your synopsis if you break the script into four parts. Most screenplays have a plot point that shifts the direction of the story every 25 to 30 pages. Pick out those four events or shifts and use them to pin down what each section is about. Usually you will find these around pages 25, 55, 85 and at the end.
Write a short paragraph, under 100 words, on each section of the story. (The paragraphs don't have to be all the same length -- that's just a ballpark.) Don't get bogged down in subplots and minor characters. Stick to what the major character is doing. As with the setup, try to reflect the tone of the story. If you get bogged down, you may be trying to explain too much about a subplot or secondary character.
Pull all these paragraphs together. Determine if it reflects the main point of the story you identified in Step 1. If not, consider that again. Maybe you need to rethink the treatment, or maybe you need to rethink what the story is about. Then go through it as you would any bit of writing: See if it makes sense. Cut out confusing elements. Polish the language, and make sure the transitions between paragraphs are clear. If you can, let somebody read it and then have her tell you what she thinks the story is about.
Make sure it fits on a single sheet of paper. You need to have one-inch margins, and no less than 12-point type. While you should use Courier font in your screenplay, Times should be OK here. The paragraphs can be single-spaced, but there should be an extra line of space between them. You should have your name and at least your phone number on this one page too.
Your name and contact information should appear at the top of the page. Then the words "Synopsis of (TITLE OF THE SCRIPT)," then the body of the synopsis.
Create a cover page with your contact information, and a space for a personal note. If you get a request to see this one-page treatment, you will most often be asked to fax it. The cover page is not only standard for faxing a treatment, but the note on the cover can remind the receiver that he asked to see it. (For example: "Here is the treatment for my adventure script "Really Cool Movie," which you requested by phone this afternoon. Hope to hear from you soon.") These reminders can be important because any production company will get lots of synopses and treatments every day, most of which are not asked for.