Great dialogue does most of these things, good dialogue does some of them.
Great dialogue:
- Does not in any way resemble speech in the real world. Dialogue should instead give the illusion of authentic speech while doing other things in this list.
- Does not waste space, every line should serve a purpose, even if that purpose is to slow down the scene or create dramatic timing within the milieu's interaction. It can be a beat, an awkward silence, or any of a number of INTENTIONAL storytelling inflections.
- Characterizes, giving insight into the speaker's thinking and origins (accents / vocabulary / word usage). Assuming the writer has sufficiently interwoven the character's interior thoughts, the contrast between what is said and what is believed adds depth and understanding.
- Pushes plot by developing information key to escalating / de-escalating the story issues in need of resolution.
- Exaggerates / attenuates tension, no matter what the topic is, it should elicit some sort of emotional / intellectual kick... ANYTHING BUT FLAT. The "kick" can be associated with the speaker or the listener, but someone has to be affected in some way by the conversation.
- Reflects physical and emotional states. Dialogue is more than just the words. It's the WAY it's said, the way it's delivered, the tone, timbre, and emphasis. It is ALSO the gestures, pacing, and EXPRESSIONS that go WITH what is said. There is a difference between "Yes!" *clapping* and "Yes!" *fist pump* ←
- notation for simplicity of this post.
- Can be PERFORMED as scripted. If an actor has to alter the dialogue to deliver it in a dramatically appropriate way, then it wasn't "great" scripting. This is true of the entirety of your narrative. This kind of thing becomes clear when a writer in your group is a British thespian with real and honest-to-god acting chops and they read their work. Out loud, the story sounds amazing. Until following along the written form you discover the performance and the source material have a poor correlation with one another.