What a character says reveals a host of information about the person. It can reveal educational level (”I shoulda went ), class (”James, be sure to place the good crystal in the breakfront”), personality, disposition, likes, dislikes, attitudes, emotions of every kind. Dialogue is never just filler or a way to dump information (”Let’s cross this street to get an ice cream cone at that stand over there.” Clunk.)
Every line of dialogue is important. Every line should in some way convey information about your character’s inner life. Well, I suppose not every line. There are those necessary short responses to what someone else is saying. But even those need to be carefully considered. The answer to a yes or no question might not be a simple yes or no. For example: “Does your dog have fleas?” The character could say, “No,” but, more interestingly, he might say, “I wash him twice a month, treat him with systemic anti-bug medication, and he wears a flea collar.” Gee, why does that guy need to go on so? What’s with him? And why is he so over the top about the fleas? Poor dog. Your reader’s interest has been piqued.
The most overt example of characterization in dialogue that I ever encountered was an actual line spoken to me by an acquaintance. When I was in my dating phase she saw me in the college cafeteria, madly motioned me over, and in front of a table full of people exclaimed: “I saw you with that guy you’re with. He’s so hot I’d like to throw him through a wall.” Hello, what?! The entire table fell silent and stared at her. She was oblivious. Now I can think of many ways to express a reaction to a good looking guy but throwing him through a wall is not one of them. What, pray tell, was going on with her?! Well, guys, you could write a book about it.