Almost all of the time, my characters just materialise while I'm writing, embodying traits from people I know in real life. Not that they're based on real people, but that their qualities are drawn from real life.
Chris from "The Guy From The Flower Shop", for example, is a mixture of three guys I know. His sweetness was borrowed from someone who can be quite shy, yet is unabashedly thoughtful and proactive with his loved ones. His impassioned ranting was borrowed from someone who's mild most of the time until he feels strongly about something good.
Finally, his maturity and perspective come from someone who doesn't conform to common social norms and conversational rituals, making him the perfect set-up for Su-Li, who is tired of pandering to some of the 'norms' she grew up with.
As fascinating as it would be to create story characters through more structured means, I find I can connect more strongly with them if I can start from a place of familiarity. I don't know if this leads to stronger characters, but it certainly helps me stay interested in them while writing.