Dialogue is important. It's important because readers are used to good dialogue. They've been marinated in film and television and can tell the difference between sparkling dialogue (Veronica Mars) versus terrible dialogue (most reality TV, especially of the type that takes place in hotels with pools). Here are a few hints I've found useful.
1. Dialogue is not the same as real life speech. If it was, readers would die of boredom. Or at least pass out. Real speech is full of echoes and ticks and repetition. These include but are not limited to:
Hi how are you? I'm fine, thanks. How are you?
Ums, ahs, ers.
Likes.
You get the picture. You can use some of these things, but only for a reason and only in limited amounts. For example, if a character says, "It's like, uh, well, I don't know, exactly," we can be pretty sure that person is lying and under thirty.
2. Dialogue makes your writing move faster. It speeds up reading and leaves more white space on the page. When things get a little slow (i.e. that scene in the grocery store just won't seem to move from Produce to the Express Checkout, add a bit of dialogue and watch it take off.) Caveat: avoid huge blocks of dialogue because can make your writing seem rushed or your characters seem pedantic.
3. Dialogue is a form of action. If nothing's happening, make a character say something to one another. Voila! You've got action!
4. Dialogue is supposed to build tension and tell us about the characters, their relationships to one another AND further the plot. Yes, it's supposed to do all that. To help it do all these things, make sure it includes an element of conflict (not necessarily a screaming match, but a bit of an edge that keeps people reading.) Also, make sure the dialogue is necessary to advance the story. If your characters spend a page talking about Rafael Nadal's tennis shorts, it should be because one of them is designing a better pair of shorts. Or dating Nadal. You get the picture.
5. To become a good dialogue writer, study the masters. Elmore Leonard and Richard Price are two of the dialogue writers I admire the most. Pay attention to how characters speak in your favorite TV shows and movies. The best dialogue writers often end up in the film business.
6. In conclusion, it's not what your characters say, it's how they say it and what they really mean. When one says, "Hey, nice shorts, Rafael!" be sure you know what she really means.

Susan Juby
Author of Getting the Girl
www.susanjuby.com