Lines 1-4 introduce a "story" that the speaker—a plural "We"—retells "every year." This first quatrain sets the scene but, apart from a few hints, doesn't reveal the subject of the story. Meanwhile, the title has set up the story by calling it an "Incident": a word that could refer to just about anything. From the start, the poem creates dramatic tension by withholding key information.
During this incident, the speaker "peered from the windows" with "shades drawn." It seems the speaker (most likely a family, but perhaps multiple families or a neighborhood) watched something from the windows (of their home?) without wanting to be seen themselves. It's unclear, so far, if they were watching in fear, curiosity, or both.
After this detail comes the strange claim, or disclaimer, that "nothing really happened." The speaker supports this claim by observing that "the charred grass" is "now green again." In other words, the grass outside the home was burned, but now it's grown back. Immediately, this image raises further questions: who or what burned the grass? If this "Incident" involved fire, why does the speaker dismiss it as "nothing really"?
The apparently conflicting claims in this stanza reflect a psychological conflict within the speaker. Perhaps the speaker wants to believe, on some level, that the incident meant "nothing"—but clearly it meant something, because they talk about it every single year. In fact, the charred and healed grass may be more than a factual detail: it may symbolize the speaker's emotional damage and healing.