As James yells for Lily to run with Harry, him and Voldemort duel to the death. While they are dueling, Lily takes Harry upstairs to his room where she has a ritual ready (the ritual that lets him survive the killing curse). Lily hears Avada Kedavra and knows that James is dead. She prepares the ritual as fast as she can but doesn't complete it in time.
Voldemort, after climbing the stairs, asks her to step aside. When she refuses he kills her, as this is going on little Harry stares at his mother's body on the floor. Harry then looks at her body, then Voldemort's and his magic reacts changing the reality of the situation. Lily is revived, while Voldemort is destroyed,
Meanwhile in six different places, five different items lose their taint, while one snake dies. One ring in Little Hangleton, one diary in Malfoy Manor, Ravenclaw's Diadem in Hogwarts Room of Requirement, Hufflepuff's Cup in Bellatrix's Gringotts bank vault, Slytherin's Locket in Black Manor, and a large snake (Nagini) in Riddle Manor died.
After the last of the horcruxes were gone Voldemort ceased to exist. Moments later Lily wakes up wondering what has happened. All she sees is a robe and wand on the floor. An hour later Sirius Black runs upstairs to see Lily sitting next to a robe and Harry sitting in his crib.
Sirius looks at Lily and asks what happened. She looks up at him and tells him that she has no clue. He asks her to start from the beginning. She tells him that she remembers James telling her to take Harry and run. That she had come upstairs to start the ritual but was interrupted. She was sure that she had died.
Sirius looks at her and is about to help her up when Severus Snape walks in the room. Sirius looks over and snarls at him asking how and what he is doing here. Then Sirius goes on to say that unless Peter told where it was Severus couldn't have found it thanks to the Fidelius Charm. Then Sirius asks to see his arm, when Severus doesn't want to, Lily yells at him to leave.
An hour later Rubeus Hagrid comes looking for Harry, only to not find him. When he reports this to Dumbledore, Albus asks him what of Lily and James' bodies. And Hagrid tells him that there was no one there living or dead. He then tells Hagrid to go back to his hut and that he would look into this.
A few minutes later Severus walks into Albus' office to tell him that while James is dead, Lily still lives but Voldemort was just a pile of dust, his robe, and his wand. And what about young Harry Potter asked Albus to Severus. Severus lets him know that the boy was alive and completely unmarked. Albus asks him to leave so that he can think on this.