In ancient times when the Fae were more of a warrior culture, The Gathering was a trial by combat. Young Fae would face off consecutively against two specifically chosen Under Fae in a fight to the death. The Fae is permitted to use both weapons and their own abilities in battle.
The battle would be presided over by a representative from both the Light and Dark, with an entourage from both sides present to watch the proceedings.
Upon victory the young Fae would declare their allegiance to their chosen side.
While the details are unknown it is explained in several episodes that Fae are trained for The Gathering as soon as they are old enough. During the ceremony the Fae's family are normally in attendance, and generally a Fae child will choose the side of their family, though there have been times when the reverse has occurred. In the vast majority of cases, The Gathering and The Dawning would be separated by centuries, and certainly decades.
The first battle is of physical combat and the second is of mental confrontation.