Dialogue: Context, Quirks, and Detail (reality checks)
 
Effective dialogue should feature and emphasize interesting characters with a unique take on things.  Take out the quirks and what you have left often isn’t worth saying.  Let your characters see the world their way.  Take pains to occupy their psyches and write down what they would say, not simply what you think needs to be said.  Allow the words to form from the way they see the world.  Let the back story creep into the lines, even if it isn't in the story yet, even if it might never get there.  And let even the flat characters show their own development sometimes, especially when it reveals conflicts that make the dialogue more interesting.

A good example of this comes from John Travolta’s initial encounter with the script for “Get Shorty”  [based on the novel by Elmore Leonard, screenplay by Scott Frank (who also wrote “Dead Again” and “Little Man Tate” and “Out of Sight”[Elmore Leonard]]

[From Time Mag Review/Article: “Travolta Fever” [10/16/99] by Richard Schickel (Travolta insisted) . . . that much of Leonard's dialogue from the novel be restored. "In the original script it said something like, 'Where's my coat? You better find it. It cost $400.'

Very functional. Pared down to the bone, the way many Hollywood production committees prefer things, so that the words don’t get in the way of the images and the special effects.  But BORING!

Compare this to the way it was in the book: 'You see a black leather jacket, fingertip length, has lapels like a suitcoat? You don't, you owe me three seventy-nine ... You get the coat back or you give me the three seventy-nine my ex-wife paid for it at Alexander's.'

Do you see how the character quirks and the detail add effectiveness to the dialogue?  It is not only more credible; it builds character and backstory.  In short, it is interesting.  As Travolta said in the Time article: It was the detail. I said I'd do the movie, but they had to put back everything they paraphrased." This took three weeks, but "they put every goodie back."

Now here is the scene from the movie’s shooting script.  Notice how much more there is than ‘You better find it. It cost 400 dollars,' and also notice how the flat character, the restaurant manager, comes alive, as we see his fear (and the momentary conflict and suspense that it develops) creep into the lines.  The writer[s] didn't write this dialogue; the characters did.  Always let your characters write the lines.  If they say too much, you can edit them later:
 

INT. RESTAURANT COATROOM – A FEW MINUTES LATER

From inside the tiny room. A couple of ratty rain coats and an old flight jacket hang to one side in immediate foreground as Chili steps into the doorway and freezes. He looks o.s. and whistles...

CHILI
Hey.

A moment later the MANAGER, an old Italian guy in a black suit, joins him in the doorway.

CHILI
What happened to my coat?

The Manager peers into the room...

MANAGER
It's not one of these?

CHILI
You see a black leather jacket, fingertip length, like the one Pacino wore in Serpico? You don't, you owe me three seventy-nine.

MANAGER
Maybe you don't see my sign?

The manager points to a sign on the wall: "WE CANNOT BE RESPONSIBLE FOR LOST ARTICLES"

CHILI
Look, I didn't come down to sunny Florida to freeze my ass. You follow me? You get the coat back or you give me the three seventy-nine my ex-wife paid for it at Alexander's.

The Manager looks OFF SCREEN, and begins speaking in Italian. Chili reacts as we hear the name RAY BARBONI mentioned a couple of times.

MANAGER
Explain to him how Mr. Barboni borrow the coat.

A WAITER joins Chili and the Manager in the doorway.

CHILI
Ray Bones took my coat? Just now?

WAITER
He didn't take it. He borrow it. See, someone took his coat, you know...
(indicates flight jacket)
... leave this old one. So Mr. Barboni, he put on this other coat that fit him pretty good.

CHILI
You mean my coat.

WAITER
He was wearing it, you know, to go home. He wasn't gonna keep it.

CHILI
My car keys were in that coat.

MANAGER
We call you a taxi.