This urban legend takes place in a washroom: specifically the third stall from the end of any elementary school
washroom (in some variations, it's on the third floor). Unlike some other legends, where the creatures will come at you unprovoked, Hanako needs to be summoned.
In order to call Hanako, you need to do the polite thing and knock three times on her stall door. This is usually accompanied by calling out, "Are you there, Hanako-san?"
If you are greeted with a reply, "Yes, I'm here!", you can push open the stall door to reveal Hanako. Said to be a little girl with bobbed black hair and a red skirt, the outcome of your courage differs: Hanako-san will vanish or, you will be pulled into the toilet and killed.
If you knock on her stall and receive a reply, you still have the opportunity to walk away if you do not open the door. However you may have just enough time after seeing Hanako to make a break for the exit and escape.