Character creation can take many forms. In many cases, characters are created seperately from the game, usually in a “character editor” that pops up before the beginning of the game proper. The Fallout series, most MMO games, and many more allow this sort of customization, where forming the character is a very “meta” experience; it’s done in a seperate mode, and any changes that are made after gameplay begins are separate and disconnected from the actual experience of the game proper.
Pre-game character creation has an essential downside, however. Because it is separate from the game, the player does not know when making her first character what the consequences of her choices will be. When playing the game, the player may discover that some statistics or abilities are less useful than they initially appeared, or decide that a differently built character would better suit the game.
Additionally, having character creation as a completely separate takes away some of the unity of feeling of the player’s experience. Because of this, a few games integrate character creation into gameplay. Maxis’s recent game Spore takes an unusually broad approach; the entire evolution of the player character’s species is shaped over the course of gameplay.
Gamasutra: Integrated Character Creation In Spore