Plot to Punctuation has a nifty post up about character flaws and how you can use them to drive your narrative:
Read the rest.
To really make your story come alive, you’ll also do well to give your characters flaws which enhance the story’s underlying drama. It’s all well and good to have a character who is afraid of the color yellow, or who simply cannot remember anybody’s name until the third time he hears it. But does it really help your story?
Most novels rely heavily on the strength of the story’s central conflict, that thing which drives the whole plot forward towards the climax. The reader’s perception of drama and tension comes from that conflict, and from the degree of challenge the protagonist faces in addressing that conflict. This is where your character flaws come in.