- Create a personality for the character. This doesn't have to ever go on paper, but you should know the character's likes and dislikes. You should be able to say what he's afraid of, his favorite thing to eat, whether or not he's a night person.
- Create a set of motivations and values for the character. This goes deeper than personality--it touches on character values. Does the character value truth? Then he'll be angry when someone lies. Does the character not really care about what it takes to do something? Then he'll be more ruthless.
- Create a plot. Plot and characterization lies hand-in-hand. If you just have the plot, then you just have a list of events. If you just have characters, then you just have a list of people. Combine events + people to get a story...and if you've established who and what the characters are and their values, then you'll know how they will react in a given situation.
My goal in writing: infuse more of my characters into the plot. I had only a vague idea of all but the main characters, but I've got to bring in more on my side characters so that they react to a situation based on their own personalities instead of what I need them to do to develop the plot.