E. M. Forester made a distinction between flat and round characters.
Flat characters are types or caricatures defined by a single idea of quality, whereas round characters have the three-dimensional complexity of real people.
The test of a round character is whether it is capable of surprising in a convincing way. If it never surprises, it is flat. If it does not convince it is flat pretending to be round. – E.M. Forester
We can round out characters by specifically developing the character’s motivations and goals. Think of Harry Potter’s quest to defeat Lord Voldemort, fueled by his parents’ murders. Great characters are driven by a deep-seated motivation and have a goal they are trying to reach.
This creates interesting characters and also creates a story arc. The main character’s driving force should be one of the first story elements you figure out, since the subsequent action will be driven by this motivation.