How can Frankenstein be considered a story inside of a story?

Frankenstein has three different narratives: Robert Walton, Victor Frankenstein, and the Creature. These three narratives set up the story within a story format. 

The book begins with Robert Walton's letters to his sister, and in those letters he tells of the story of Victor Frankenstein. In that portion of the book, Frankenstein's narrative appears. This is the first story within a story. Then, Frankenstein tells Walton about finding the creature and at that point the creature's narrative begins - another story within a story.

All told, there are really two stories within a story. Walton's story is the one in which the other two stories appear. Mary Shelley uses three narratives in order to have the fullest amount of emotion and impact for the reader, but she also uses Walton's narrative as bookends for the novel. His story frames the other two, and the other two help to inform his end decisions.