After deciding a social class, draw up a brief family tree for the character, including at least two previous generations (ie mother and father and grandparents). Decide what these ancestors did for a living. Was your mother a housewife or a seamstress or a troll-slayer? Was your father a humble farmer, a petty bureaucrat, a soldier, a highwayman or a lay-preacher? Was grandad the man who saved the village from rampaging orcs, or was he the local trapper, or even the local drunk? Doing this in reasonable detail will help the player to determine the motivations and mannerisms of the character. The son of the town drunk may be a vocal abstainer from any vice resembling frivolous entertainment. The son of a witch may become a crusading paladin, or a black wizard. The son of a violent, wife-beating mercenary may become a city guard to stop similar incidents. The key to this is WHY? Why did this imaginary person become what they are? 'Whys' become 'what's', and without a 'why' for a character, they tend to be very hollow, or just numbers on paper.
Another useful activity in this step is to craft a few significant life-events compatible with the character's demographic and geographic background. These events should not be to over-the-top, but should go some way to explain the character's motivations and personality (Cyberpunk uses some tables to do this, and they're worth a look). The result need not be a complete timeline of the character's life, but should include a few major occurrences. Examples of these would include such things as meeting future mentors, parental or sibling deaths, brushes with the law, wars or raids that the character witnessed and so on. Childhood loves that may have an effect on personality or career choice are also examples of these.
These life events are used to create the 'Defining Elements' of the character, which will make up the character's motivations, outlook, self-image and become the basis for determining the character's career choice and skills.
In my example, I decided I'd like a fighter-type character. With some input from the DM, I decide upon some life events for my character. These are:
The city guard in Dhantazar (the capital of Semphar) was once a highly regarded group of professional soldiers. However, in the past twenty years, the ranks have been filled by retired soldiers who are more often than not lazy at best and corrupt at worst. I decide my character, (whom I have christened Yusef al-Alzar'ed), will be in the city guard, as was his father and grandfather (mother's side).
Yusef's grandfather (Amir al-Alzar'ed) was a stoic and well respected officer in the guard when it was still reputable, and achieved a fair measure of fame amongst the locals for his fairness and dedication to duty. He retired on a good pension at forty-five, and died shortly after. As was the tradition in those days, Yusef's grandfather had served in the Caliph's army before becoming a guard, and had seen much of Semphar, and told many of his tales to Yusef before he died.
Yusef's father, Abdul al-Alzar'ed, also joined the guard after having served his allotted time in the army. Abdul did not have the same moral character of his father however, and soon succumbed to the temptations of his position, taking bribes, casting a blind eye, and debauchery. He had taken the surname of his father-in-law when he was married, because it elevated him from the common soldiery class to an officer's rank.
Whether it was the pressure of expectation from his father-in-law and his peers, Yusef did not know, but Abdul became a disgrace to the uniform Yusef held in such high esteem. When Amir died, Abdul no longer had his father-in-law's reputation to protect him, and was soon arrested and tried for corruption. During this time, Yusef had just joined the guard, and had to now support his mother and younger siblings, and suffer the taunts of his fellows and overly officious investigations the Caliphate into his own activities. Despite this, Yusef was a man of stronger fibre than his Father, and remained in the guard, though never promoted because of his father's crimes.