Most writers use both character and plot to drive the story forward. Keep that in mind as we go through the ideas in this post. It's not an either/or. It's a sometimes this/sometimes that/sometimes a blend of both.
In the simplest form, here are two definitions.
Character-driven: When something about the character's essential self leads to a particular action or event in the story.
Plot-driven: When a character takes a particular action so that the result is a particular plot point.
These definitions are fairly abstract, so let's take a look at an example.
Let's say that when you first dreamed up Johnny and Drago's story, you thought of a couple of plot points right away. You knew that these two would start their struggles at the lunch with the doctor. You knew they would end up working at the same hospital, and that they engage in a grim and brutal competition there. And you have a clear vision of Johnny, bloody and prone after some terrible event -- Drago leans over him, their eyes meet, and neither of them knows for a split second whether Drago will save Johnny or let him die.
That's a rough story structure right there. Three points, beginning, middle, and end. The conflict is initiated at the lunch. It escalates while they work together. It climaxes during that scene where Johnny is gravely injured and Drago holds the power of life and death.
That final scene -- we'll call it the bloody Johnny scene -- is a plot point. You're going to have to do something to get the characters to that point. You will start by asking a few basic questions. Where does the bloody Johnny scene occur? Regardless of the answer, you'll have to find a way to get them there. How does Johnny get injured? This event must also be narrated in a scene or scenes.
In other words, that bloody Johnny plot point will drive several other key points along the narrative. And those points -- travel, battle, whatever -- will be plot-driven.
But before you get to that scene, you'll have these two characters engage in a fierce and nasty competition. First they compete for the internship. Regardless of how that internship question resolves itself, you know that in order for their characters to really engage in conflict escalation -- the "rising action" in Aristotelian structure -- you must have them both in the same place. Working in the same hospital. Interacting with the same people.
You want really juicy stuff to happen in the hospital so that you can avoid the dreaded sagging middle. So you ask some questions. Drago's got that survivor's quiet toughness; how can I make him appear weak? Johnny's got that suave charm; how can I make that a liability instead of an advantage?
These questions focus on aspects of character. You might come up with a short list of key character traits which you want to attack in the rising action. These traits can be positives or negatives.
Johnny -- arrogant, charming, sophisticated, smart but not intellectual
Drago -- withdrawn, strong, suspicious, intellectual but not smart
And then you start brainstorming things that can happen to exploit these character traits. Johnny flirts with a nurse and gets in trouble for fraternizing. Drago sits alone at lunch until someone joins him one day without even asking. (Who will it be? How will this affect Drago?) You might come up with a list of ways to exploit each man's character traits, and pick the most dramatic to craft a series of events along the middle of the plot.
When a plot point occurs as a way of advancing the character's arc, or when it is a direct outgrowth of a character trait, that is a character-driven plot. All our work on core conflicts is a form of character-driven scene mapping. We first decided who these people were, and then we decided what could happen to them.
It's worth repeating here: most writers and stories use a blend of character and plot to drive the narrative.
One special point for romance writers. Romance writers tend to use the term "character-driven" and "plot-driven" to talk about something a bit different. Because the endpoint of a romance is always presumed -- an HEA between the hero(es) and heroine(s) -- the story will always be plot-driven. That is presumed. It's built into the conventions of the genre.
And because romance requires the resolution of characters into a pair-bond (or trio-bond, or alien-orthodontist bond, or what have you), there will also always be aspects of the story which are character-driven. Each character will have to figure out a way to evolve in order to be worthy of the HEA, and that evolution will take place in the context of action. So romance is also always character-driven. It is presumed and built into the conventions of the genre, just the same as the HEA is a plot-driven aspect of the genre.
So given all these assumptions, romance writers use the terms character-driven and plot-driven to describe something else, something particular to their genre. Romance stories always have what are known as the external and internal plots (or, sometimes, the internal and external conflicts). Let's look at an example from "These Old Shades," the classic Georgette Heyer Georgian romance.
External: The young boy is actually a girl. She was swapped at birth with another baby, and since her pseudo-parents died and she went to live with her brutal pseudo-brother, she has been in disguise as a boy. The hero discovers her true identity and uses her as a pawn in a game of revenge against her true father. He buys her from her psuedo-brother and takes her into his house as a page before transforming her into a lady with appropriate manners.
Internal: The girl must come to terms with her femininity. She must adapt to the ways of the aristocracy and lose some of her sharp edges. She must learn how to trust, and whom to trust, and when. The man must leave behind his cruel and arrogant ways if he is ever to succeed with this girl. He must find his personal goodness. He must learn to be a protector. And so on....
You might notice that the external plot has little to do with the formation of the romantic bond, and the internal plot revolves around the formation of that bond. External events might help the couple face internal obstacles, or might drive the internal plot in other ways, but the external plot is generally something separate from the pure romantic plot itself.
So when romance writers say their story is plot-driven, they're usually referring to the external plot. And when they say it's character-driven, they're usually referring to the internal plot. The internal plot tends to draw more upon true character-driven plotting techniques (even though the endpoint is a predetermined outcome), and the external plot tends to draw more upon plot-driven plotting techniques (even though the endpoint can be up for grabs).
This is a flip on the usual way we mean these terms. If the endpoint controls the outcome in a plot-driven story, and the external conflict in romance has an open endpoint, then that aspect of the story is not "plot-driven" as non-romance writers generally use the term. You follow me? It's a distinction in terminology, but it's one I wanted to address in the context of this post just so we're all clear on what we mean.
Now, you're probably wondering why this matters. Who cares if your story is plot-driven or character-driven? The truth is that the technique will not show in the final manuscript. When I read a book, I can't tell if they started with a character or an event. And I shouldn't be able to.
But some of you are getting ready to start NaNo. You'll need some tricks to keep your story moving forward at a fast pace. So here is one: if you get stuck in the plot, switch tactics. If you've been focusing on the action, switch to the characters. If you've been giving the characters free rein, create an event and make them work toward it. It's a quick and dirty way to get unstuck, and as an added bonus, it can make you see new angles in your story and develop it more deeply in the fast-draft/first-draft stage.