Whether characters or plots are more important to successful fiction remains a topic of debate. No matter which side you favor, characters are important in writing, and a poorly developed character can ruin an otherwise good story. We have a number of threads on how to develop successful characters. I'd like to open the floor for discussion on how you, wearing the hat of a reviewer, decide whether the character development has been successful. To start off, one thing I often do is write down, or just think about, how I would describe the character in question. Do I have a clear picture of him or her? Does the personality come through for me? Does the character remind me of people I know? Does the character change in a credible way, if at all, over the course of the story? Does the character have depth? Then, with these thoughts in mind, I go back over the story to see how much of the this profile is explicitly told, how much is implied indirectly, and how much is supplied by my own imagination. I give extra approval for characteristics either provided indirectly or evoked in my imagination. Of course, not all characters need to be highly developed, not even main characters. Sometimes their presence at the right place and time is all the story requires, and even a main character may be the catalyst for events rather than an intrinsic point of interest. But knowing where the character exists in the development space is a necessary first step in evaluating his or her role in the story.
When reading a story, I am highly sensitive to characters. If I don't get a good feel for the main character(s) I am not likely to finish the story. I like to know general information such as: height (short, tall, average), eye/hair color, weight (This may sound weird, but it just helps give the character personality if I know they are trim, obese, or normal... ) Then, rather than having the character directly pointed out as sarcastic, nice, or anything of the sort, the author needs to convey through dialogue and action just who the character is. If I could insert any person from the story into the character mold, then the author failed. A sign that the author has suceeded, for me, is if I can anticipate how the character will react/act during future scenes.
I don't understand character development at all. But if the story is well written and a good mystery, I'll keep reading it, until I find out the answer to the mystery. I usually don't care about characters. I only care about the action and the mystery, which makes me curious about it. And if the story is too long, I'll just quit reading it if I see a movie of it.
I don't know about being abe to predict a character's actions, but a good character for me doesn't rely too much on my imagination as the reader to fill in the blanks. Like someone else said, there should be enough implicit information to make the character unique in the story, if not in the universe.