The story of 'The Bad Seed' by William March explores the concept of good and evil through the character of Rhoda, a child who develops a habit of killing people when she doesn't receive what she wants. The novel shows how external forces can shape a child's understanding of the world and the presence of evil. Goodness is represented by characters like Kenneth and her husband, while evil is embodied in Rhoda's actions. The story also explores the theme of horror, with March using indirect methods to convey fear to readers. The novel ultimately highlights the thought processes of young human minds when faced with uncertain conditions.