Fairy Tail's story arcs pit its heroes against a wide variety of mighty villains, starting with Lyon Vastia and his allies on Galuna Island. By the time Natsu and his allies survived their ordeal against Grimoire Heart on Tenrou Island, they thought they had faced their final test. Then the Grand Magic Games tournament began.
Many battle shonen have a tournament arc, but the Fairy Tail anime made the most of it. The Grand Magic Games story arc is one of Fairy Tail's longest and most exciting, and more importantly, this was when Natsu, Gajeel, Lucy and the others truly proved themselves, allowing the disgraced Fairy Tail guild to be reborn.
Recent events had not been kind to the Fairy Tail guild. While the guild gained some new members after clashing with the defunct Phantom Lord guild, the S-rank mage exams on Tenrou Island afterward went horribly wrong. The insidious Grimoire Heart guild arrived in force, led by its dark guildmaster Hades, the former 2nd master of Fairy Tail. It took everything Natsu and the others had to triumph, only narrowly missing defeat thanks to Gildarts Clive's timely intervention, and after that, the appearance of Acnologia, who put everyone on Tenrou Island into stasis for seven whole years.
Without its best wizards on hand, Fairy Tail fell into hard times, suffering from poverty, a poor reputation and a lack of solid leadership. The Sabertooth guild now dominated, and they, with guilds like Twilight Ogre, regularly tormented Fairy Tail, exacting petty revenge for past embarrassments. But an opportunity to bounce back was right around the corner: the upcoming Grand Magic Games tournament, a massive multi-guild tournament held every year in Crocus, Fiore's capital. Sabertooth was a major force in every tournament up to that point, but Fairy Tail was back in business, and its very best would prove their guild's worth, tournament-style.
Fairy Tail was starting from zero, and its members suffered some early defeats during the multi-stage tournament, despite a strong start in the qualification rounds, largely thanks to Erza and Elfman Strauss. Sabertooth was still the top dog, and it shot right to the top of the leaderboard, with Fairy Tail sitting at 0 points. Then someone from Fairy Tail's ancient history returned: Mavis Vermillion.
Decades ago, Mavis practically died due to her difficult relationship to Zeref, but had since gathered enough magic to appear in ghostly form. While her guild could hardly believe their eyes, Mavis put her tactical mind to use coordinating Fairy Tail's teams during a free-for-all battle in Crocus' streets. Without her, the guild might have lost to Sabertooth once and for all.
But with the help of Fairy Tail's first member, Erza, Natsu and the others maneuvered themselves into the best possible positions to avoid their most dangerous foes until the time was right to strike. Erza, for her part, faced powerful rivals in the form of Minerva Orland and Kagura Mikazuchi. And even after this battle was concluded, Mavis would return again to aid her beloved guild with everything at her disposal.
Dragon slayers Natsu and Gajeel, despite being intense rivals, united in the face of Sabertooth's own dragon slayer duo, Sting Eucliffe and Rogue Cheney. Natsu and Gajeel, despite their antipathy towards one another, learned to fight as a team against Sabertooth's best, and halfway through, Gajeel trusted Natsu to handle Rogue and Sting all on his own. Sure enough, Natsu triumphed thanks to his guildmates' faith in him, and Fairy Tail proved to all Fiore that it was home to the continent's finest dragon slayers.
Laxus Dreyar, meanwhile, attended to family matters. He had only recently begun mending his relationship with his grandfather Makarov, and now, he faced his father Ivan Dreyar, master of the sinister Raven Tail guild. Despite Ivan's psychological warfare and cunning magical illusions, Laxus prevailed, proving that the Fairy Tail way of trust and friendship would always overcome deception and manipulation. Laxus had become a true Fairy Tail hero at last, after inciting the guild's civil war and getting exiled for his misdeeds. From this point on, Laxus would be a proper Fairy Tail wizard, and never again turn on his guildmates.
Lucy had a moment of glory, too -- reinventing herself as a Celestial wizard, summoning multiple spirits from Taurus to Gemini and Cancer with ease during her duel against Flare Corona, and even launching the Uranometria spell. If it weren't for Raven Tail's cheating, Lucy would have won. She came a long way, and in future battles, she would prove it again.