I haven't received any writing questions, so I'm going to get into a series on character development, since that seems to be one of my strengths. I'll start with some of the methods that aren't so great. I won't say that these are bad ways to develop characters or that you should never do these. It's just that these are perhaps lazy ways that are risky if you don't do it well.
It's not a great idea to base your main character directly on yourself. That gets into potential "Mary Sue" territory. That's a term that comes from fan fiction and refers to a character who is clearly the author's avatar who's inserted into an existing universe -- Ensign Mary Sue joins the crew of the Enterprise and saves the day. In original fiction, it's come to mean the character who is obviously the author's stand-in, in a way that detracts from the story. This happens when the author is so emotionally bonded with that character that she loses all objectivity where that character is concerned -- everyone's in love with that character and anyone who isn't is just jealous, the character has no real flaws, the character never really faces consequences for her actions because for the author it would be like those things were happening to her.
(As an aside, I do think the "Mary Sue" accusation is overused and usually misused, often meaning any female character who is remotely competent or who has any self-confidence, but that's another discussion, and here I'm strictly using it for the more obvious cases.)
On the other hand, you're the only person you know from the inside out, so just about every character you write is going to be based in some way on yourself. The trick is to do that in such a way that you don't see the character as a projection of yourself. You can take your traits, feelings and personal experiences and mix them up with other stuff, and then you'll have a character who feels like flesh and blood that you'll still be able to treat like a character and not like an extension of yourself.
It's also not a great idea to directly base a character on a real person you know. For one thing, there's the possibility of legal action if the real person can be identified and your portrayal is negative in a way that isn't true. For another, basing characters directly on real people (including yourself) shows a lack of creativity. If you're writing fiction, you're supposed to be making people up. With real people, you may also run into that lack of objectivity that creates the Mary Sue problem. If you base your villain on your ex-boyfriend, odds are that working out your personal issues with that character will result in a less-realistic character than if you'd created someone entirely fictional (with maybe a few of the ex's traits, just for fun). If your cast of characters is essentially you and your friends, it starts to read like the kind of role-playing games my friends and I played when I was a kid -- not anything formal like Dungeons and Dragons, but just the make-believe scenarios we played out while running around in the back yard: "I'll be the captain and you be my first officer and now you do this and I do that."
Just like with taking aspects of yourself and mixing them up to create a character, you can take traits, actions, quirks and bits of physical description from real people and mix them up with other elements to create characters. You can even use a real person as an inspiration -- someone who is like someone you know in some way, but then you build a character around that rather than just plunking this real person into your story.
I would say that the farther you get from the main characters, the safer it is to draw on real life. If you have a conversation between your hero and a bank teller that lasts for all of half a page, it's probably not going to be a problem if you base the bank teller on your high school English teacher. In that short an appearance you don't have to worry too much about lack of objectivity, and very little of the person you really know is going to have a chance to come through. If a character with that small a role is more vivid in your mind because you're seeing someone you know, then maybe that little cameo moment will be more vivid for readers.
Another really dangerous thing to do is base your character on another fictional character (aside from a story that overtly uses public domain characters in new situations, like Lizzie Bennet fighting zombies or solving mysteries). I don't know how often this happens, but I have run across books where I'm pretty sure that I recognize the characters, or at least the inspirations behind the characters. Spike from Buffy the Vampire Slayer shows up in a lot of paranormal vampire romances, for instance. I'll admit to having used some favorite characters as a jumping-off point because there's something in those characters I want to explore that I didn't think was explored in a satisfying way in the original work (I tend to like the secondary characters more than the heroes), but it's like using real people -- take those key elements you want to explore and create an entirely new character around them. Your closest friends who know your obsessions may recognize the source, but if you've done your job in filing off the serial numbers, readers who don't know you shouldn't be able to tell where your characters came from.
And there are also situations where breaking all the rules can work. There are authors who deliberately base their cast of characters on themselves and their friends, with that being the gimmick of the books (several mystery authors do this). There was an author who got a lot of publicity by openly admitting that she'd based her main characters on a pair of TV characters and had written a book to allow herself to explore that relationship and find a way to make it work. There have been hugely bestselling books that were acknowledged Mary Sue stories, with the author writing her own personal fantasy that ended up striking a chord with readers. But I do think it's something beginning writers should be wary of. It's usually a sign of an amateur manuscript when you can tell that the hero is basically the author in costume or when you can spot the characters from other sources.
Next I'll get into some other ways to build characters.