This term refers to two distinct ideas: 1) an individual in a short story, novel, or play and 2) the personality or identity of that individual. The double meaning of this term is important to understanding how a writer tells the story. We usually ask, for instance, "what motivates this character?" and "how does this character change over time?" while analyzing the a short story or a novel. In that case, we are talking about character as an individual: what kind of characters does this writer put in his novel? But we can also consider the term character to mean the sum of qualities in an individual: does her character change as the story unfolds?
Additionally, we should think about the term "character" as a certain kind of personality trait, right? If we say, "My father is a man of strong character," we mean that he has integrity, that he is genuine and honest. But when thinking about "character" as an idea involved in appreciating a novel or story, we have to look at the more abstract definition: character is who a person is, the dimension of a person that defines his or her identity and values.