When doing a close reading, what is involved in the process of annotating a text

At first i was afraid to approach him—then the fear left me. he was sitting looking out over the city—he was dressed in the clothes of the gods. his age was neither young nor old—i could not tell his age. but there was wisdom in his face and great sadness. you could see that he would have not run away. he had sat at his window, watching his city die—then he himself had died. but it is better to lose one's life than one's spirit—and you could see from the face that his spirit had not been lost. i knew, that, if i touched him, he would fall into dust—and yet, there was something unconquered in the face. how does the conflict at the beginning of the paragraph move the plot forward? the narrator realizes that he is scared of the gods. the narrator realizes that he distrusts the spirits the narrator realizes that the god was a man. the narrator realizes that he is powerful like the gods.