Recently, I read a great article in the Romance Writers Report. It was one writer's take on how he flushes out his characters.
I usually keep one of those old fashioned composition pads (you remember the ones you used in college) to do a rough sketch of my story, which eventually becomes a more detailed story structure. Then I start looking at my main characters and create a character profile for each.
That profile usually contains character basics: age, ethnicity, height, weight, etc. It also includes things like job, education, relationships, and life motivations.
As I build out my motivation, and characters begin to come to life for me, the pieces flush out more. I begin to see how the characters fit together to create the puzzle of my story. If one character is ex-military, and another always dreamed of being military, but wasn't...how does that affect their relationship? What is the back story on both that shaped each character's opinions/feelings of the military?
What do you use to help you build out your characters and your story?