There are a couple of ways I create characters.
The first way involves starting with someone I know – one of my friends, usually – and altering them. Maybe I change an aspect of their personality, by giving them a temper. Maybe I change the color of their hair from brown to blue. It’s a lot easier to write someone you know, and by tweaking them slightly, you can invent someone entirely different.
And, of course, putting them in a new setting will help with the differences. Dynamic characters undergo changes as they continue along their journey – the way the person will react is different from the way the character will react. As the character grows and changes, their reactions will change, moving even further away from their original inspiration.
The second way is to invent an entirely new character. This is harder, because you have less of a starting point, but I think it’s more common. Some of my characters walk fully developed into my head; others I have to work at.
My characters are a mix. Usually my main characters are based, at least partially, on people I know; my minor characters tend to be wholly from my head. Of course, this isn’t strictly true for every story – it really depends on where the idea for the story came from, which I will delve into later.