Character Creation
Character creation (also character generation or character design) is the process of defining a character for a game. The term usually refers to the creation of Player Characters by the players.
Statistics & Traits
The process of defining a character's material abilities varies wildly from game to game, and is a key element of the system. Early RPGs often used random generation to produce a character's statistics; the player would then design the character around these pre-existing attributes. Later systems placed more of an emphasis on player choice and deliberate design, frequently in the form of point buy mechanics. In some systems numerical stats are dispensed with favour of keywords.
Personality & Background
Methods of defining a character's history and personality are less clearly defined. Some games (including the infamous FATAL) include mechanics for personality traits, while others generate attributes and skills as a result of rolls on a background history table. Even these games only provide general ideas such as 'the character is cantankerous' or 'the characters served in the military', leaving the players to imagine the details.
There are as many ways of coming up with a background and personality as there are gaming groups.
Physical Appearance
Some players commission portraits of their characters or draw a sketch on the sheet, while others are satisfied with a short description.