This is Part Three of a four-part series. Part One: the basics is here, and Part Two: internal narrators is here.
EXTERNAL NARRATORS
A narrator who isn't a character in the story will tell everything in third person, because as an "I" they're not present in the events. Evelyn was thinking about seducing Alex, while on the other side of town Joanna was planning to seduce Evelyn. But, of course, it's up to the storyteller - you - which consciousnesses you allow the narrator to lead the reader inside. And it's up to you whether the narrator can tell things that no character in the story knows.
And, of course, that also means that the narration may not enter any individual consciousnesses. This objective point of view is sometimes (and perhaps more usefully) called dramatic point of view. 'Dramatic', that is, in the sense that it tells nothing that the audience of a play couldn't see: dialogue, setting, and physical action. We're told nothing of what characters think or feel: nothing of the inside of their heads or bodies. Hemingway's story "Hills Like White Elephants" is a classic example, although as that Jauss article points out, he twice breaks the "rule" of objectivity, to immensely powerful effect. That effect is partly the result of what John Gardner in The Art of Fiction describes as the "savage sparsity" of this kind of narrative.
If the narrator does give us access to individual characters' thoughts and perceptions of what's going on - shows us the world through characters' eyes and minds, and perhaps with their voices colouring the narrative - then it's called subjective point of view. That's much the most common kind of narrative, because the normal project of fiction in our culture is to admit us to characters' minds and feelings until we're convinced by them: until we feel that these characters-in-action are real.
So, assuming you do want your narrative to take on at least one subjective point of view, how many might you, the storyteller, choose to let the narrator narrate from?
EXTERNAL NARRATORS (i): one limited point of view
As with an internal character-narrator, even if you have an external narrator it may seem easiest to limit it to a single point of view of a single character: nothing is told or known except what that character knows and experiences. You could pretty much write this in first person and just switch the pronouns, and it would have all the same advantages of reducing the options to something manageable. An internal character-narrator, and an external narrative limited to one point of view, are so similar that when I have a student whose third-person narrative seems rather distant and flat, I often suggest re-working in a bit in first person, because getting closer in psychic distance often comes more naturally in first person; they can then switching the pronouns back from "I" to "he", to discover how to get close in third person.
Writers often choose to work with a third-person narrative with a limited point of view, instead of first-person, because it adds a little flexibility: it's natural to pull a little bit further out in psychic distance, where you need to, towards something more neutral and "god's-eye-view", which is why this kind of narrator is said to have "limited omniscience", and can mention the weather, for example, even when the character might not specially notice it, or fill in a bit of background knowledge or geography. The problems are the same too, though: plot-difficulties, limitations of voice and setting, and an overall narrowness. Above all, the drawback is what John Gardner suggests: this limited-subjective viewpoint has a "pettiness and unseemly familiarity" which he finds frustrating as well as unattractive. I think he has a point, although I'd talk more in terms, again, of claustrophobia, because the subjective point of view allows for nothing - no feeling or experience - beyond the individual.
EXTERNAL NARRATORS (i): switching between limited points of view
This is many new writers' solution to those problems: for the sake of manageability the narrator locks the story into a particular character's point of view, but switches to another limited point of view at a break between scenes or chapters.It can work well in practical terms, as it does solve some of the difficulties and limitations in plot and setting, and gives an opportunity for different voices and attitudes. But it's relatively inflexible, since the story might work better if you could move point of view in the middle of a scene, to shine a light from more than one angle on what's happening. And although the narrative can take on the flavour of the character's voice that it's locked into at the moment, or move outwards to something more neutral, it can't move fluidly between different characters' voices to build a sense of the scene as a whole, and make the most of the contrast: it can only switch, abruptly, from one to another.
EXTERNAL NARRATORS (iii): the privileged point of view
This is the kind of narrator who is usually called omniscient, or sometimes authorial, or knowledgeable. This narrator is privileged because you, as storyteller, grant them access to whichever consciousnesses you choose, and they can also range more widely and tell things that no character knows. "Omnisicient" is the traditional term, but isn't really accurate as there are always characters and events they don't narrate. Also, some writers and critics, reacting against the 19th century likes of Eliot and Dickens, are irritated by the idea of an authoritative, objective voice who knows the absolute truth of this tale. There's no such thing as objectivity, they say, and no absolute truth. That seems a bit daft to me, given that behind the apparent narrator stands a novelist who is always in complete control of what's said and told in a novel. But it is true that many of us are more interested in exploring a shifting series of subjective realities for our characters, than setting forth the "truth" of the world we're depicting.
It's handy for plotting, of course: if the reader needs to know something, or the tension will be greater if they do, or there's something no character knows, it's possible to convey it. It can make it easier to cope with complex action or a scene with many different elements if you're not locked into a single point of view until a change of scene or setting. And there's another privilege you can grant your privileged narrator: it can tell what a character doesn't know, in the sense of something they don't know they're feeling/thinking - motivations they don't consciously understand, effects which will only flower into behaviour later. As anyone who's had any kind of counselling or psychotherapy will know, much of how someone acts in life is controlled by parts of our past and personality we're scarcely aware of. Although a narrator-Evelyn, telling their own story, may well understand and tell us things that character-Evelyn didn't, what Evelyn can tell us is still only the tip of the iceberg of what really makes up his/her personality. More broadly, any narrative - with an internal or an external narrator - which is limited to a particular point of view will not be able to convey things about the viewpoint character which are deep in their unconscious. You may be able to get the reader - or another viewpoint character - to read between the lines and deduce things. But only a privileged narrator can actually give us access to the very darkest and lightest corners of a character's soul.
At the extreme end of the possibilities of the privileged narrator is what James Woods in How Novels Work calls the essayist narrator, a personality expressing opinions in their own voice about not just the events and characters of the story, but also the world at large. I suspect that readers (and writers) either love, or hate this kind of novel, because the personality - voice, opinions, judgements - of the writer looms so large in it. You love it, if you love the narrator.
Then there's the kind of narrator who I'd call a storyteller, if we weren't already using that term for something else. This is the teller of tales: the fable-writer, such as Angela Carter, where the narrator is always in charge even if they never set out to prove a point or persuade you of something. This narrator's project is quite different from the normal purpose of realist fiction. Here, the narrator's voice is all, and (rather as with the essayist narrator but to an entirely different end) that's what keeps us reading: the voice of the storyteller. Our engagement is less with the characters as fully-rounded, realistic people, although we may care about them, but instead it's very much with the narrator.
The essayist and the teller of tales are the only external narrators who might sometimes say "I". They're not present in the story - everything there is "she/he" - but because they have a direct engagement with the reader, they might say to the reader, If you've ever been on a sleeper train you'll know that... or even I don't want to bore you so I'll skip....
Having said that, if you're planning to use any kind of narrator other than a limited character-narrator, it's essential to have in mind a "god's eye" point of view, separate from any characters. Giving your narrator a separate point of view in this way needn't mean that it sets forward opinions or writes essays, it needn't mean they're a character in any full sense of the word - though you may find it helpful to have some idea of what kind of person they are. It only means that there is a point of view, which knows more than any character knows, as a god would: that's another privilege that you, as storyteller, have granted your narrator.
My main point-of-view posts:
POINT OF VIEW & NARRATORS 1: the basics : what point of view is, what a narrator is, and why it matters
POINT OF VIEW & NARRATORS 2: internal narrators : character-narrators who narrate in first person
POINT OF VIEW & NARRATORS 3: external narrators : limited, switching and privileged point of view in narrators who narrate in third person
POINT OF VIEW & NARRATORS 4: moving point of view and other stories : how to work with a moving point of view, second-person narrators and other stuff
HOW TO MOVE POINT OF VIEW : not just between chapters, but in a single sentence. And why (as long as you do it well) no one can tell you it's not allowed.
CIRCLES OF CONSCIOUSNESS : a more useful and sophisticated way of thinking about point-of-view and psychic distance, and how to use it to best effect