(From An Interview With Gene Wolfe)
Style and voice seem crucial to a short story but are easily turned into abstractions.
Style has become a bucket of worms, thanks to the deteriorating standards of the public schools. The chief style I see in student stories is American Illiterate. It shows up in published stories sometimes too. "Should an enemy warrior cross that line, kill them!" Well, that's okay if the order-giver is an illiterate. Unfortunately, the illiterate is just about always the author. Other than that, the style should suit the story. Imagine The Wings of the Dove as told by Huck Finn.
It would be funny for ten pages, but...
If you're asking about the author's voice, or the narrator's, it's so closely linked to style that I see no point in discussing it separately. If you mean the voice in which each character speaks, each must be different. The butler mustn't sound like the footman, even though neither is an important character. This is one of those truths that students reject out of hand. They reject it because everybody sounds alike.
Can you describe the process of characterization—from the first glimmers of a character to fully rounded character?
Characterization is easy and rare. It's rare because so many people can't be bothered. You characterize by showing the character acting, talking, or thinking in characteristic fashion. That's all there is to it. Read Dickens, for whom characterization was as natural as breathing.
What makes for effective dialogue?
Oh, my! It must entertain the reader, forward the plot, and characterize the speaker. All pretty much at the same time. It must not be too wordy or too telegraphic; it must sound natural – that is, like something that speaker might say at that time to that person.
Dialogue is action.
'How could the Outsider have chosen such a bungler? ...When had he ever offered a single sacrifice, however small, to the Outsider? Never! Not one in his entire life. Yet the Outsider had extended infinite credit to him... Certainly he would never be able to repay the Outsider for the knowledge and the honor, no matter how hard or how long he tried.' (Gene Wolfe, Nightside The Long Sun)