1.  Characters are created through dialogue.  Flat dialogue equals flat characters.  Create dialogue that provides insight to your characters:

“I was just talking to Ethan,” he said.

OR

“I was just listening to Ethan whine and moan about failing some lame English test,” Mark said sarcastically while rolling his eyes.

2.  Much of your story can be told through dialogue.  Instead of telling us what is going on, have the characters show us in their own unique way:

They walked down the street while a group of people watched.

OR

“Thank God I can see the Schnucks sign from here,” Ethan whispered nervously, glancing over his shoulder.
“Yeah, the way those goons are geeking at us gives me the willies,” Marcy replied as she stepped over the curb.

3.  Use dialogue to describe other characters in the story.  This adds necessary and creative details to your story.  Rather than describe how Ethyl looks, have Barry do it.

Ethyl was wearing a dirty shirt and tattered jeans.

OR

“Where you commin’ from sister?  That shirt supposed to be brown?  What happened to your jeans?  Looks like you rolled all the way to school!”  Barry exclaimed as he pointed and giggled.

OR

“What happened to you?  I heard about some fight after school, but I didn’t think you were going to go through with it,” Barry whispered in shock as he quickly moved to help Ethyl up the stairs.

OR

 “Where did you get that outfit? You look like Brittany Spears—minus the ‘Bling-Bling’ of course!”  Barry’s eyes glowed with sarcasm when he saw Ethyl enter class.

4.  Make dialogue meaningful.  Dialogue should move the story along—not slow it down.

“So I said, ‘dude,’ and then she said ‘no way, dude,’ and then we were both like ‘dude!’  I’m telling; you, for real!” Chris said.

OR

“I was totally like, amazed at the fact that she came that close to a shark on her board,” Chris said, brushing his blonde bangs away from his face.
“Awesome dude!  What did Leilani do when she saw that?” Joe asked, as he leaned forward to rest his arms on the table.
“Well, get this!  She got totally bug-eyed at the sight of a fin in the H2O, but totally froze up because she didn’t want to be mistaken for a baby seal or something else Jaws might find tasty!  Dude, she is so like a cat: 1 life down, eight more to go,” Chris laughed, as he drank the last of his coffee and got up to pay the bill.
“No way,” Joe sighed, wide-eyed.