I can see some very good suggestions in this thread, as well as in the tvtropes one. However, being a slightly odd person I offer my slightly odd approach:
Most of the time I play myself, with a twist (oh come on, don't roll your eyes like that, at least give it a shot and see what I mean).
The thing is, I'm often introspective and have a firm grip on my personality - I know exactly what I'd do if I was rich, or if I was broke (or even homeless), exceptionally strong or disabled... I know what I'd be like if my parents were aristocrats, or if I grew up in a village, forest or under a bridge. I'm pretty sure how I'd use magic powers if I had any or how would it affect me if I saw death on a daily basis, had to kill and skin my own food or for that matter if my parents died when I was 3. Of course most likely I wouldn't be exactly like what I think I'd be in all those circumstances, but the point is that I can imagine it easily (so at any given time I still know what my character thinks, what he wants and strives for, etc).
The most positive side of this approach is that it totally excludes stereotypes - since I'm not a stereotypical person a character that has my personality steers clear of common pitfalls like "your standard fighter", "just some druid who likes nature" or "lawful stupid", "chaotic idiotic", etc... So the next step is to customize the personality though his backstory (which could be almost random for all I care) - what I do is take a personality I know and mold it around circumstances that I have thought up (or at least have a good understanding of, in cases when backstories are mandated by the GM or coordinated with outers). Once I have done that, I know who my character is and can explain each decision and motivate every word that comes out of his mouth. From that point on it only takes a small effort to envision everything that my character would be thinking - from how attached a fighter is to his sword to how likely the wizard is to fireball a demon with a dozen mind-controlled villagers around it to save a village.
That's all the character development I do before I start a game. From then on each encounter changes my character's personality, though intentionally each thing that happens in game has more weight than it would normally have on a person who has been alive for 20, 50 or even 100s of years (as it sometimes happens). So from the outside it looks like the story leads to character development and I never end up with similar characters. In fact all that happens is that circumstances influence one default personality, however so far nobody seems to have noticed that I do it this way (and if they did they never complained).
There is of course one major pitfall - DnD does offer near limitless possibilities of story and characters, so this way of building a character doesn't work for all cases. The good thing is that I usually don't like playing characters that are highly incompatible with my personality... For example I'm pretty sure I could play a dragon well enough and I'm sure who I'd be if I was a vampire or skeleton/zombie who retained their intelligence, but there are definitely limits to my imagination and self-awareness... I've never played a female character and I wouldn't bother with druid, much in the same way that I can't find motivation to play myself as cleric or bard. On the plus side, those never seemed all that appealing to begin with, so I'm sticking to my way
There are a ton of other minor benefits and pitfalls, and to avoid being tedious I'll mention just one of each:
pro - It's easy to remember what a character is like even after not having played him for years. Once I recall his circumstances (i.e. read the backstory and adventures with the group) he's as good as back to life
con - I have to rely on other ways to build most NPCs, as well as characters with inferior intelligence or wisdom (pretty much everybody has a hard time playing a character much more intelligent/wise than they are, though I've only seen a handful of people who can play int 5 or so characters without having to resort to stereotypes)
PS: a stray thought (comes as a bonus that sneaked past what I really meant to say) - I can't help but wonder how most PCs aren't arrogant pricks. Being level 5 means that you can kill 9 out of 10 people around you with a sneeze... You've defeated hundreds of monsters and chances are you only had to flee from a handful of adversaries (if at all). Your backpack alone costs more than some people earn for a week (not to mention the goodies you have inside).It seems to me that in the real world this would make even the most humble people I know into right bastards.
PSS: personally, I find this way of doing RP more interesting than just pulling personalities out of my behind. Anyway, you can also use the personality of somebody you know really well combined with the (most likely unusual) circumstances of RP games and also get very similar results.