A recent Facebook discussion on my wall led one of my FB friends Leslie Guccione, an author of 30 books, to blog about the importance of totally knowing your character and setting.
I have often thought how stories are built from the inside out. Appropriately, her blog on character is named, "Know Your Characters Inside and Out." She listed a variety of questions writers should ask about their character. This list is similar to an handout that is in Teaching the Story which you can download here.
I hope you'll read her entire blog, but here is her ending advice:
Whether your character works against the background you’ve devised or reflects it in stereotypical detail, you’ve provided a solid frame on which to weave voice, behavior, attitude and goals as you hook your reader with their tale you’re telling.
By the way, I highly recommend Donald Maass' book, Writing the Breakout Novel Workbook. His exercises are probing and will make you get to know your character in such a way that you can portray him or her authentically.
Leslie summarizes that blog with, "Your goal is to breathe life into every individual & create atmosphere for every setting. You have to take your readers there. And they have to want to stay."