Macbeth, alone, agonizes about whether to kill Duncan. He'd be willing to murder Duncan if he thought that would be the end of it. But he knows that "bloody instructions, being taught, return to plague the inventor" (1.7.10). Also, Macbeth notes, Duncan is a guest, kinsmen, and good king. He decides ambition is not enough to justify the murder.
Macbeth wrestles with his ambition and wins! He knows that murdering Duncan will only end up leading to more bloodshed, and ruin his honor, which he prizes.
Lady Macbeth enters, asking where he's been. Macbeth tells her they won't murder Duncan. She questions his manhood. Macbeth replies: "I dare do all that may become a man; who dares do more is none" (1.7.46-47). But Lady Macbeth continues: she says she has nursed his baby, but if she'd known her husband was such a coward she'd have rather "dashed [the baby's] brains out" (1.7.56).
Lady Macbeth and Macbeth debate about manhood and courage. She says it's taking what you want. He says it's the power to put responsibility before selfishness, the power to not take what you want.
Macbeth asks what will happen if they fail. Lady Macbeth assures him they won't fail if they have courage. She outlines the plan: she'll give Duncan's bedroom attendants enough wine to ensure they black out from drunkenness. Then she and Macbeth will commit the murder and frame the attendants. Macbeth, impressed by her courage, agrees.
Lady Macbeth's tragedy is that she doesn't realize that murdering Duncan will torment and ultimately destroy her. Macbeth's tragedy is more profound: he does realize it, and still gives in to his ambition.