In Scenario #1, the stock will be above the sell price (Assigned/Called). If the stock is above the sell price then the stock will be taken away from the seller and the seller will receive the amount of money they sold the stock for in there account and also keep the premium or rental that they received. This is known as being assigned or having your stock called away.
In Scenario #2 , the stock will be below the sell price (Expire worthless/ Uncalled). If the stock is below the sell price then the seller will keep the stock and keep the premium because the buyers contract has expired worthless or been uncalled. The owner of the stock can then sell another contract or "rent" out the stock again the following month.
Please watch the following video.