Any story has three broad stages -- beginning, middle, end. Shit starts happening, the shit gets worse, the shit gets resolved. You can choose to subdivide those categories any way you like -- even hardcore three-act cheerleaders will divide the first act into introduction and inciting incident, the second has a "midpoint turn" bisecting it, and the third act typically includes both climax and denouement -- but in the end the story falls into one of those three stages.
The three act structure is descriptive, not prescriptive. It's useful when telling a story, especially in screenplay format where you have rigid page count restrictions, to be able to divide the script into thirds and get a feel for how well it's paced. If it takes you until well into the "second act" (or, god help you, the "third") to actually get to the point of the fucking script, you have a problem. If the "second" act isn't a constant escalation of complications, you have a problem.
The mistake people too often make (because all the screenwriting books tell them to) is to to fit every story into the same box. Oh shit, I'm on page 72, it's time for The Romantic Leads Have A Falling Out. There's no legitimate reason for them to, at this in the story, but the Page Count Gods have declared it thus. This is what "formulaic" means.
Storytelling is a fractal thing. At every level you're dealing with beginning, middle, end. Ideally, you should be able to subdivide a story into as many acts as there are scenes, because every scene should end with the characters somewhere they weren't when the scene began -- emotionally, physically, knowledgably, geographically -- with no easy way, or no way at all, to get back to where they started. Because if a scene doesn't accomplish that, it better be funny as fuck or there's no reason for it to exist.
Three act structure isn't a myth, but following it slavishly and calling yourself a writer is like doing Video Copilot tutorials and calling yourself a VFX artist. You know which buttons to push to accomplish a very specific task, but you don't understand what each step is doing and can't synthesize them into anything new, which is where artistry actually begins.