Worlds Contain Characters
"Avatar" is a neutral term that indicates the icon or graphic in a game that represents the player - the avatar can be a ship, a car, a character, or whatever - the player understands that "this is the icon I am controlling," but sometimes, it can go deeper than that: the avatar can become a character.
"Character" is a concept taken from narrative, and some video games borrow upon it heavily, such that the avatar in the game is not just an icon representing the player, but a character with its own personality and character traits.
When a character is created, it should be carefully chosen: it should be a character that the player wants to identify with, or would want to "be." It does not necessarily need to be realistic - it can be a cartoon character. There are situations in which realism can be a drawback, particularly when the game is too abstract or too fantastic.
Character is not necessary. For example, the FPS genre often lacks a sense of character - the player himself is the character, taking a first-person view. This can be compelling, but has some limitations (for example, the Japanese are not fond of FPS, preferring to see the character they are controlling, uncomfortable with being the one doing certain things).
Character also pertains to artificial intelligences within the game: every enemy, ally, or helper the player encounters is a 'character," which may be developed in varying degrees of detail. Generally, the more time a character spends on screen, or the more critical the encounter with that character to the game, then the more development you should do.
As for creating characters, the usual spate of random tips:
- Create a list of functions/roles in the game (the hero, an enemy, an assistant, a shopkeeper, a boss monster, a hostage, etc.), and ascribe a character to each.
- Define the traits for each character - how the character would be described as a person
- Cart and compare character dimensions - The key diagram is hostile/friendly and dominant/submissive axes (see diagram below)
- Diagram a "web" that illustrates the relationships between characters - how they work together, how they feel about one another
- Consider the status of characters - especially in terms of the way they relate to one another (who outranks whom) and how that impacts their relationship
- Use the "power of voice" - Use voice actors to develop characters, and allow them some interpretative freedom in portraying the character
- Use the "power of face" - Facial features and expressions have a significant impact on perception. The frozen-face character is a puppet.
- Consider character growth - As a story progresses, the events will have an impact on characters, and they will evolve.
- Avoiding the "uncanny valley" - there is an area on the continuum of human likeness where a character becomes creepy, and this can be really off-putting to players. (worth noting, this can probably be exploited if done on purpose)
A diagram is provided that schematizes characters. Click for larger version.