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 has 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 isn't the greatest dialogue ever, but it is typical of the genre, and was no doubt written by a professional.

Let's see what it's doing and what it's not doing.

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.