********MAJOR SPOILERS********
The ending of The Last Airbender is less about one character winning a duel and more about the movie gathering all of its elemental and spiritual threads into one final surge. By the time the last battle begins, the Northern Water Tribe is under attack, Aang is still far from mastering the elements, and Zhao is trying to cripple the world at a mythic level, as well as a military one.
Once Zhao kills the Moon Spirit, the stakes change immediately. This is no longer just a battle between the Fire Nation and the Water Tribe. It is a rupture in the balance of the world itself. The waterbenders lose their power. The spiritual order is damaged. Even Iroh, who has been controlled and strategic for most of the movie, breaks and openly turns against Zhao.
Then Princess Yue steps forward. That is the emotional center of the ending. Yue was given life by the Moon Spirit as a baby, and now she gives that life back. Her sacrifice restores the Moon Spirit and returns the world to balance. It is one of the clearest moments in the film where duty, love, and myth all land in the same beat.
After that, Zhao is finished. He has pushed too far, and once the balance starts restoring itself, the Fire Nation’s seeming certainty starts collapsing with it. Meanwhile Aang stops thinking like a frightened kid who is only reacting and finally moves into the Avatar role more fully. He enters the Avatar State and uses the ocean itself as a weapon, raising an enormous wall of water and driving the Fire Nation back.
That giant water sequence is the movie’s true ending image. It is not subtle, but it is effective as a statement of scale. The world has been thrown out of balance, and only the Avatar, working in concert with the elements instead of against them, can answer that kind of violation.
Then the movie leaves one final thread hanging on purpose. Ozai learns of the defeat and gives Azula her next assignment. Zuko and Iroh are not safe. Aang is not done training. The Fire Nation is not finished. The ending closes one battle while obviously trying to launch the next phase of the larger story.
So the plain version is this: Zhao kills the Moon Spirit, Yue sacrifices herself to restore it, Aang unleashes the ocean in the Avatar State to drive the invaders back, and the Fire Nation regroups with Azula positioned as the next looming threat. The ending is part rescue, part sacrifice, part setup for a story the film clearly hoped it would continue telling.