Dialogue is a conversation between two people.

Jill: How are you Jack?

Jack: I'm good, Jill and you?

Jill: Not good Jack. Not good at all.

Dialogue in fiction should be indirect.

Dialogue often has to do two or three things at once.

• It may have to reveal facts. (This is called exposition) but also...
• AND/OR It has to reveal character (or at least be consistent with it).
• It has to move the story forward (either point 1, point 2, or both, do this)

Here's the basic combos:

Don't reveal facts -- Don't reveal character -- -- Story isn't moved forward: a scene like this can be cut.

Do reveal facts -- Don't reveal character -- but do be consistent with known character -- Story is moved forward factually: this scene displays exposition.

Don't reveal facts -- Do reveal character -- this moves the story further by increasing the stakes. -- Story is moved forward in a more powerful, emotional way.

Reveal facts -- the truth comes out Reveal character -- character under pressure behaves in a meaningful way. -- Pace now so intense that the story must draw to a close: no one can sprint for long.

And it can really wow the audience.

Here's some dialogue from Iron Man 3.

The character is revealing some facts. He does not say:

I’m no longer working for you, Mr President. Now I’m working with the Vice President and he’s the one who’s given the order to have you killed.

Instead he says.

I found myself a new political sponsor. And this time tomorrow he’ll have your job.

This is definitely not the greatest dialogue ever, but it is typical of the genre, and was no doubt written by a professional. It's just bad enough for us to learn.

Imagine a situation where a magician performs a trick, perfectly. There is no way for you, the audience, to learn how the trick works. Now imagine a magician performs a trick, but is a little bit clumsy, a little bit un-practiced -- there's just enough cracks for the light to get in -- just enough clues for you to see how the magic "ought to" work.

That's why I picked the dialog above -- it's bad, but it's bad in a professional way.

Let's see what it's attempting and how it attempts it. What choices were made.

Do reveal facts -- Don't reveal character -- but do be consistent with known character -- Story is moved forward factually: this scene displays exposition.

Here's how they could've done it worse, and how (according to the theory) it could've been done better.

Again -- it was already professional enough to get by the editors.