So, that established, how does one create compelling characters? Characters that leap off the page, then draw the readers down into their own little hell or lift them up to heights unexplored?
A variety of things contribute to create compelling characters. There's the tangible, strength of character, meaning being true to who the character is and not causing him or her to go off on inexplicable tangents or for the character to fight you as the writer. (Believe me there can be some hairy battles between writer and character when writer wants to force a character to do something agains that character's character - get it?)
There's also the human touch. That means basically making the character really human, just like the rest of us, giving that character quirks, foibles and problems of his or her own that intermingle with whatever the problems of the story are. People are many-faceted. If you're an observer of people, and as a writer you should be, then you're familiar with that fact. The trick is to reveal that humanness, to not make a villain all dark or the hero without flaw. To make Indiana Jones afraid of snakes, give a serial murderer a puppy, or a killer who wants to kill a girl friend's spouse so they can be together a consience. And by that I mean go deeper. There's more to being afraid of snakes or having a puppy, there's the interior of the character. Reveal some of the emotional guts to your readers. Why was Indiana Jones afraid of snakes? Why would a murderer have a puppy and what does the puppy mean to him or her? If the guy who wants to murder his girlfriend's spouse has a conscience how is he going to accomplish is goal, what's going on inside?
Additionally there's also the less tangible, what the story-teller writes between the lines. The underlying feeling that is created out of the character's actions, how that character relates to others within the story and what springs out of the character's own past history. This links back to my last sentence above. Make the reader feel part of the story, like the characters are people he knows, friends, acquaintances, nightmare people from the pages of his own newspaper, then you have a compelling character.