Characterization broadly refers to the description and development of characters. Arguably, most fiction is characterization in a broad sense; one could say that plots and settings, for instance, generally work to develop character. The material below describes some of the terminology writers and critics use to discuss a narrower and more conventional sense of characterization.
Primary and Secondary Characters
Definitions of primary characters generally rely on work metaphors: the primary characters drive a story, carry the weight of a story, and so forth. As they do that work, the primary characters exhibit a depth or complexity that allows the reader to see changes or realizations in them as a result of the events of a fiction. (Another way to say this is that primary characters are generally dynamic, or changeable, whereas secondary characters are generally static, or unchanging.)
Though essential to the development of fiction, secondary characters exist not to experience the transformations of primary characters but to create the circumstances of those transformations. Many writers refer to all characters as either primary or secondary, while some add a third category of something like "extras" in films--the often nameless characters that add functional realism but nothing else.
Direct and Indirect Characterization
Direct characterization tells the reader about a character; indirect characterization shows a character in action and leaves the reader to infer the rest.
Actors and directors in plays often refer to a character's motivation, the set of sometimes contradictory desires that creates words and actions in a fictional world. The same approach can help us understand works of fiction. Writers sometimes think of stories as arising out of conflicts between different characters' motivations, and the same approach can also be a useful tool for readers.