Vito's plan is sheer brilliance. First he convinces Tessio and Clemenza to give him money in exchange for getting them off the hook with Fanucci. This puts them in his debt, something which which he reminds them of immediately saying that they should remember he is doing them a favor. When they ask how he plans to pull it off, he simply says its his problem.

Vito then pockets some of the money and puts a smaller amount on the table when he confronts Fanucci, making the lame (but still respectful) excuse that they are a little short, and would he please take what he can offer, etc. He takes a calculated risk here, but I think his Sicilian cunning has informed him that Fanucci is a bully, and is more talk than action. After all, he knows bookies who don't pay him, and he also knows from Genco that Fannucci is somewhat slppy in collecting protection money and complains and gets angry when poeple pay late. He also has allowed Vito and company to set up their little fencing business without clamping down on them sooner. Vito sees this as weakness, and he believes that Fanucci has lost his edge, and would no longer resort to murder and other brutal tactics necessary to keep the neighborhood under his thumb.

Vito's beliefs are confirmed when Fanucci accepts the low ball offer, and tells Vito that he has "balls" and that perhaps Vito should consider coming to work for him.

Having pulled this off, and knowing that Fanucci is hated and feared in the neighborhood, Vito then put part two of his plan into play and assassinates Fanucci, and, in the process takes all the money out of his wallet!

Obviously the news of Fanucci's demise and the rumor about who caused it seep throught the neighborhood. Clemenza and Tessio are no longer Vito's partners, they are his subordinates. No doubt they both played a rle in making Vito a hero in the neighborhood for having vanquished the dreaded Fanucci.

Vito becomes the "go to" guy in Little Italy, but instead of ruling the way Fanucci did, he sets up an operation in which he does favors for people who return the favors monetarily or in any other way Vito can arrange. He is seen as a kind of Italian Robin Hood, and we see the affection for him that the people have in the scnes where the fruit vendor won't take his money (and in which Vito thanks him and says "if I can ever do anything for you you come, we talk....") ; and in the scne where he relents to his wife's pressure and helps out the widow with her landlord. The way he deal with the landlord is telling as well. When the land lord refuses Vito's offer, Vito stuff's the money in his ocket and tells him to please ask around about him.
The landlord does this and he learns that Vito is the man who killed Fanucci, and he returns to Genco Olive Oil terrified, and doesn't leave until he has lowered the rent.

All in al the Fanucci move is what made Vito Vito, and launched him as THE GODFATHER.