When creating a character, clearly there's a lot to decide – physical attributes, environmental influences, life history, past relationships, current objectives, flaws, weaknesses, strengths, and idiosyncrasies – but one of the most important aspects of your character, and one that you cannot dismiss, is his or her psychology: how she thinks and why she behaves the way she does.
It's key to understand the major events in your character's past; however, that's all futile if you don't sort out how her life experience has affected her mind. Because let's face it. Real believable characters are screwed up just like the rest of us. Irrationalities, hypocrisies, denial – we're all of that and more. Most of us are blind to honest self-evaluation, and as a result, we often project a false image of ourselves – consciously or unconsciously – to camouflage our ugly truths.
But what a character sees in her mind's eye is not always a mask. Often a character will visualize what he or she hopes to achieve or become, and sometimes this dream or vision is grounded in reality and possible to obtain, but often it's just folly to everyone but your character. Whatever the case, you must understand the inner workings of the character's mind - his or her internal gears and how they turn. Knowing that is something I like to call the character's imaginary center.
The imaginary center is the core of the character's imagination. But it's not simply just what a character imagines, dreams, or daydreams; it answers the "why" a character has dreams. Why does a character imagine that he is a lady's man when in reality he's a crude chauvinist pig? Why does he imagine he's "hilarious" as he dishes out "three guys walk into a bar" jokes, yet it's obvious he's the least funny guy in the room? Why does she believe she can offer amazing relationship advice even though she's ending her fourth marriage in so many years? The easy answer is to say "just because", but "just because" is never good enough.
It's one thing to decide a character acts a certain way, but it is quite another thing to discover why that character is that way. Why does she imagine becoming President? Why does he see himself as a professional athlete? Why does he envision his classmates wearing only underwear? Once you understand "the why" of your character's imaginary center, you're that much closer to fleshing out a real and unforgettable character.