We have experiences, and as a result, our autonomic nervous system creates physiological events such as muscular tension, heart rate increases, perspiration, dryness of the mouth, etc. This theory proposes that emotions happen as a result of these, rather than being the cause of them.
The sequence thus is as follows:
Event ==> arousal ==> interpretation ==> emotion
The bodily sensation prepares us for action, as in the Fight-or-Flight reaction. Emotions grab our attention and at least attenuate slower cognitive processing.
http://changingminds.org/explanations/theories/james_lange_emotion.htm