Historical fiction author J.R. Tomlin had an interesting post in which she noted that after doing research for a book, it is often best to only include twenty-five percent of what you actually learned. Excessive detail tends to kill pacing and is, for the most part, is often unnecessary. The average reader (or even not so average) really doesn't need to know the exact weight and dimensions of all the weapons used in a fight scene, for example. However, it's still important that the writer know that other seventy-five percent. The details that they are not explicitly spelling out still influence how they write the scene and contribute to verisimilitude.
I also think this split works well for character development. A good, well-developed character who sticks in a reader's mind can make the difference between a book being good and excellent. Although various writers have their own strategies for this sort of thing, I'm a person who likes to build up a decent background for the character with some major life events, general personality, a couple of quirks, et cetera. A lot of this detail never makes it directly into the page, but the mere fact I've developed it allows me to write more natural reactions and dialog. In addition, I think it makes for characters that come off more inherently interesting.
In my YA WIP, Osland, there is a decent number of supporting secondary characters. Many of them have details of their lives that I've worked out but are not directly mentioned in the book. For example, I have a character of Afrikaner descent who fought against Apartheid. It's never actually explicitly stated in the book. Indeed, even her ethnic background is only hinted at as the main character can't quite place her accent. By developing that background for the character though and the experiences that went with, it colored all of my scenes with the character throughout the book in a way that I think (well, I hope at least) made her more memorable.
In a similar way, one of my other main characters has a very strained relationship with her parents. Although it is going to become relevant in a sequel, it isn't really spelled out in this book, but is, instead, reflected by her interactions with other characters and certain personality traits/psychological issues.
Whenever I design characters, I just think about how we interact with people in real life. Though some people like to yack at you and tell you their life story (like me, for instance!) often we have to learn bits and pieces about people over time. Before we know a lot about them, we still form judgments on them, learn to be able to predict reactions, and other things of that nature.
What sort of methods do you use for character development?