The most important step in creating a character is the one that should be done first, but which, unfortunately, is often barely done at all. Before you worry about numbers, points, and skills, the first thing is to decide the kind of character you want. You can do this before, and separate from, working with the numbers.
Before you begin, you should know a good deal about the place and time your character is to come from. Your GM will have available the details you need. You should also check with him to see if he has any special requests. He is likely to require certain types of characters and rule out others; he may also ask that your background contain certain elements, perhaps to explain how you came to be in his adventures.
Then, it's up to you to create a character. Pay attention to the kind of abilities, weaknesses, and skills he will have. But don't concentrate on these things now; there will be time enough for them later. For now, you want to create a person from scratch, and the best place to start is his childhood and experiences. Use scrap paper to jot down ideas and work out events you want to have happened to your character. Use events in his past to explain the abilities, preferences, fears, desires, philosophies, and weaknesses of your character; and, if you leave any unexplained, be prepared for the GM to make up his own explanation, and let you discover it during the adventure!
Above all, do not skimp on this step. It is tempting to just jump ahead to the adding up of points. Remember, however, that, hopefully, you're going to be living with this character for a long time. If his foundations are poor, the flaws will come out in play; and you can't perform a shallow character well.
When making a non-player character, you usually spend less time on each step than you would if making a player character. However, it is important that the design of an NPC is just as thorough. In fact, it is the thoroughness of the NPC's initial design that lets you skip steps later. Here you come to know the NPC well, so later, you can make up statistical information as it proves necessary. Shortening, or worse yet, skipping, this step will cause your NPCs to become mere fighting machines or hollow plot pawns rather than characters.
In real life, some people are simply better hero material than others, having more abilities and fewer weaknesses. However, in our game, it is important that all the characters start with approximately equal power, even though this is not realistic. If some of the characters become more powerful, and thus useful, than the others, the "lesser" characters will find themselves yielding to the superior characters, and never doing anything. This is quite boring for their players.
To solve this problem, we use a point system that helps keep the characters balanced. Usually, each character starts with 100 character points which you use to buy stats, abilities, weaknesses, and aptitudes. Chapters 2-5 will describe how you can spend your character points. (Some campaigns may start with more or fewer character points.) This point system does not create balance on their own; it is simply a tool for the GM to use in encouraging balance, so expect the GM to treat it as such.
A campaign where most of the characters have 100 character points creates a typical heroic campaign. More dramatic (or melodramatic) campaigns will have more; at the upper limit, a superhero campaign will use 300-500 points for a starting character! "Ordinary" people have about 30-40 character points.
As an option that you should decide on beforehand, consider awarding additional character points proportional to how much background material the player writes up to describe the character. A reasonable rate might be one point per hundred words (and allow the player to trade them in for development points at the usual rate). Naturally this rule can get you in trouble -- one page of one hundred words is not the same as another, and you might not want to penalize people who have a creative and interesting background that just happens to be short. On the other hand you might not want to get caught up in 'grading papers' and the ill will that might lead to. Check with your players first.
Any character can trade in two character points for one plot point. Plot points can be used by the player at any time to get out of a sticky situation: for instance, a plot point can be spent to allow the player to change the value of a die after it has been rolled. (Other uses are listed in section 14.3.)
In Chapter 6 we will begin to use another kind of point system, which is also intended to help keep players in balance; we call these development points. Don't confuse them with character points! You only use development points to buy skills, and you get them regularly over the whole life of your character, while you only spend your character points once, when creating the character.
Chapter 12, "Summary," is a thoroughly described example of character creation. Whenever some point or technique you are reading seems unclear, anywhere in the text, the best thing to do is to find and read the piece of Chapter 12 where the unclear technique is described. This means that you have to get used to looking there when you need an example to understand something! Reference to the example in Chapter 12 is probably the single most valuable thing you can do to improve your understanding of anything unclear.
Similarly, section 13.4 continues this example by showing later development, as described in Chapter 13. It is an invaluable reference when the GM gives your character more development points later in the campaign.
The glossary in section 0.1.6.2 is frequently a valuable source of information, especially for newcomers to roleplaying.
The reference charts in Chapter 16, particularly the GM's screens, can be helpful when you are having trouble finding a specific fact or procedure in the rules.
If you are really stuck, or if you want to make some suggestions or pass along an idea, send me an email!