Many gamers create characters who are very, very similar to themselves—my swashbuckling ninja is 'Andrew Rilstone as he would be if he were fitter, braver and living in a world that included mutant penguins with katanas' or, put another way 'A swashbuckling ninja with Andrew's personality.'
Other gamers like to create characters who are slightly, or very, different from themselves—fictitious personalities, imaginary personas.
To get one red-herring out of the way: character-type role-playing is not necessarily poncy or artistic. An Evergoth, angsting about the meaning of life or trying to resolve his personal growth issues is character-playing. But so is a Champyhero standing with his hands on his hips and saying 'You'll never get away with this, you fiend.'
Most role-players, after they have had a character for a few weeks feel pretty comfortable with him. They know whether he runs into battles shouting 'Yield, traitor, and I shall grant you a swift death' or 'Eat lead, motherfudgers!'. They know whether he gives money to beggars. They have built up a rapport with other characters in the group. The fact that Sir Lami the Good always ends up lecturing Taffy the Welshman about his dishonesty is what makes the game amusing and fun. Such gamers often joke that they could tear up their character sheets and play the character without.
The challenge of character generation is to give the player some semblance of this familiarity with his character in the very first session—or, at least, to lay down the seeds from which it can grow.
What character generation must do, then, is to provide a hook, a hint, a suggestion, an archetype, a shape, a flavour, a smell, a colour, a funny walk or a funny hat which will enable the player to create a persona; to give him something to do and say in the first session.
The oldest method, is to allocate a player a 'class' or as we now say a 'template' or an 'archetype.' At its simplest, your 'hook' is that your character is a Fighter or a Wizard. You know that all Fighters are rather stupid, direct chaps who run in with guns blazing, and that all wizards are old, wise, mysterious who favour indirect cerebral approaches. Obviously, the draw back of D&D was that personality type was linked too strongly to skills. Modern template systems separate the two out: your Star Wars 'Smuggler' and your Star Wars 'Pilot' are very similar in mechanics and game play terms, but very different in terms of personality and role-playing.
Assuming that you are not going to use either of these methods, then it seems self-evident that you are going to have to think up some facts about your character for yourself and write them on your character sheet. A good way of soliciting these facts is by asking the player questions about his character. Amber and Everway both make question and answer sessions an integral part of the character generation process.
It is a mistake to think that simply piling up information about your character will make him easier to play, let alone more believable. In the first gaming session, unless you have photographic memory, such a character will be much harder to play. So there is no point in expecting the player to fill out reams of details about his home life, army career, culinary preferences, sexual hang-ups, home decorations and so on. These are only useful if they give us a clue about how to actually play the character.
'What food does your character like?' 'Chocolate.'
This tells us nothing about the character. It is wasted space on the character sheet. At worst, it becomes an irritating tick.
'Was it alien abduction, do you think?'
'I don't know. Have a piece of fruit and nut, and I'll think about it.' But you only have to go a little further, and it becomes very useful indeed:
'What food does your character like?' 'Chocolate. He is hardly ever seen without a half finished Mars Bar in his hand.'
Well, that has already told you certain things about the character. He's a slob, he's overweight, he talks with his mouth full, he's always in a hurry... We can use it to answer other questions. 'What did he have for lunch?' 'Probably a cheeseburger on the back seat of his car.' 'Can he catch up with the criminal?' 'He has a hard job running for the bus.'
'What food does your character like?' 'Chocolate. He always offers guests a Belgian chocolate out of an enamel box.'
That implies a totally different character. And the difference between the two characters, slob vs sophisticate, may very well be enough to take us through the first session of play.
Is it better to do this through question-and-answer sessions, or via some random method? It is blindingly obvious that, if the player is asked to come up with his own answer to defining questions about his character, he will come up with a character which he likes, and will enjoy playing. It will also mean that he will always come up with the same type of character, and may go stale or bore the other players by generating his seventeenth sweaty vested chain smoking cop. It is also a real problem on the many occasions when you really want to play in the campaign, but your mind is a complete blank when it comes to thinking up a character. If you use some random method, the player may be landed with a PC who he hates, or is unable to play. On the other hand, the random charts may suggest to him something which would never have occurred to him, but which he thoroughly enjoys playing. It is sometimes easier to say 'You are playing a.....swordsman whose best friend is a....small squirrel....GO!' than to say 'You can play anything you like. In your own time.' And of course, making a good job of the far fetched character which the dice landed you with may be very entertaining—almost a game in its own right.
What questions would I recommend?
Try the following:
1: 'Your character has a house, a den, a secret base. It doesn't contain any equipment you can use in the game, but otherwise, it can be anything you like. Describe it in a couple of sentences.'
2: 'Your character has a special weapon, or piece of equipment. It doesn't have any special powers or dice adds, but otherwise, it can be anything you like. Describe it in a couple of sentences.'
3: 'After the adventure, your character always tells someone about what happened. Describe this person in a couple of sentences.'
But above all, you need to know what type of game you are running, and what type of information and characters are necessary to make it a good game. Consider the following three scenarios:
1: You are the crew of an EarthFed space craft. Your reactor crystals are low on power, and, due to a misjump, you are in enemy space. Six evil Octoplonk fighters have just dropped out of hyperspace. What will you do?
2: You are the crew of an EarthFed space craft. Your reactor crystals have run out of power. Life support is fading. Worse, there is a shape shifting Octoplonk agent on board, who has assumed the shape of one of the crew, what will you do?
3: You are the inhabitants of an EarthFed space station. You are near the planet which mines reactor crystals. You are all attending the annual St Diana's day festival, which is also being attended by the Octoplonk ambassador. What amusing or interesting things will happen to you at the party?
I submit that scenario 1 could be run perfectly satisfactorily without any character generation, in the required sense, whatsoever. The game is going to be one of action, adventure, combat and really wild things. We care about the Helmsman's ability to take the ship through an asteroid field, not about his unhappy childhood. However, a certain amount of chrome could be added by giving the characters some quirks: it might be fun to know that the Captain is a heavy smoker or that the Engineer speaks with an impenetrable Scottish accent.
Scenario 2, on the other hand, requires that we know more about our characters off-stage lives. It is a game of tension, claustrophobia suspense, and horror. We want to know who deal with crises by making wise cracks and who try to be very cool and level headed; who would shoot a friend in the back in the line of duty and who would disobey a direct order if it seemed immoral. On the other hand, we don't care too much about biographical facts about the characters. It doesn't matter to much that Officer Dibble and Officer Stibble are an 'item': they aren't going to be going on a date in the middle of a sinking ship.
Scenario 3, on the third hand, is entirely about such facts. Love interests, rivalries, hobbies, irritations, personal quirks and religious believes—these are going to form the basis for the character interaction. The game is only going to work if they player's questionnaire includes questions like 'Name someone on the station who you especially dislike' 'Name someone on the station who you especially like' 'Name something the rest of the people on the station don't know about you.'
I therefore contend that it is meaningless to talk about a 'good' or 'bad' method of character generation. All that matters is whether a method of character generation is suited to the scenario or not.