What is important in this step are the 'Defining Elements' discussed earlier. Using this example, we can create each of these five characters from a similar encounter, and focusing on our 'Defining Elements', demonstrate how the encounter can create the five different paths.
The situation is this: The church is responsible for law and order in the city, and forms the basis of the justice system. A rich merchant is arrested for rape, and is taken into custody by the church/city guards. After being taken custody, the merchant offers a bribe to the Abbot of the church, and is allowed to 'escape' both the dungeons and from justice. The character witnesses the exchange between the merchant and the abbot.
Character One- 'Noble' Thief: The character witnesses the bribe being accepted, and decides that the church is full of thieves. After completing his year of indentured service, he begins to prey on the priests and temples, stealing their gold and giving it to the poor of the city, where he believes it rightly belongs.
Character Two- Devout Priest: The character witnesses the bribe being accepted, and decides that the church is full of thieves. He decides to stay in service to the church, and to weed out the corrupt clerics and return the mission of the church to it's true purpose; the conversion of infidels, and well-being of the city.
Character Three- Fighter: The character witnesses the bribe being accepted, and decides that the church is full of thieves. He is rather fatalistic, and believes that if you have the money, you can escape justice. He joins the church guard, in order to catch out the criminals that escape justice, and prevent the crimes he knows occur.
Or, he thinks, if it's good enough for the Abbot, it's good enough for me, and becomes a corrupt prison officer, taking a commission for each of the prisoners he lets slip out.
Character Four- Paladin: The character witnesses the bribe being accepted, and decides that the church is full of thieves. He receives a vision from the church's deity of a lawful and obedient church, with an honest and goodly clergy. The character becomes a inquisitorial paladin, crusading for order in the city, and ferreting out corrupt priests and guards.
Character Five- Opportunistic Priest: The character witnesses the bribe being accepted, and decides that the church is full of thieves, and he decides that this is the life for him. He studies hard enough to pass his lessons, but spends more of his efforts watching the other priests and acolytes in order to 'get the dirt' on them for future use. He ends up a very unpopular but politically powerful priest.
This was a quick example to demonstrate the importance of Defining Elements in character creation. For a full character description, each of the characters would need to have other defining elements that were the impetus for the choice they made. These may be other similar encounters, familial influences, or others. For example, Character One (the Noble Thief) may have come from a poverty-stricken area, and this affects his decision to champion their plight. Character Five (the Opportunistic Priest) may also be from a poor background, but sees the corruption of the clergy as a way to 'get ahead'. What makes the choices is what makes the character unique; the Defining Elements.