This topic jumped at me after thinking about a post I replied to in Facebook. Bear with me with some background information.
The posting was about the revelation that JRR Tolkien was nominated for the Nobel Prize in literature by C.S. Lewis in 1961, and poor Tolkien was discounted early in the selection process – apparently for poor storytelling, or something similar. This article was topical because of the fame of LOTR, and in particular by Peter Jackson's screen adaptations. Many people 'ooed and ahhed' because they viewed him as a master writer, but a friend of mine, John Hughes, pointed out that Tolkien was far from being a literary genius. Nuances apply here. Setting aside whether a reader likes LOTR or not (or Tolkien or not), a successful storyteller he is, and given the generations and multitudes of people who read, and reread LOTR, he is in my mind a master storyteller. There is a distinction between master writer versus master storyteller, when it comes to the assessment of literary excellence. While I'm not saying the Nobel Committee are the doyens of literary assessment, I think they got it right with Tolkien, from a literary point of view, and especially in 1961.
Now, to the thoughts I really wanted to share with you. If LOTR isn't a literary masterpiece, by some high standards, why is it so successful, including in pre-Jackson days? I think it's because it is a darn good yarn. Tolkien himself stated that his objective was to write a really long tale and sustain interest – he scoffed all his life at efforts to dissect his work, to find meaningful allegory. He most certainly did succeed in writing a sustained yarn. But are his characters written well – with depth and insight? More importantly, did they need to be?
I think we come to an area of fiction writing that applies universally, but in different ways depending on the writer, the genre/style, and the audience: even the most 'literary' writers don't spell everything out when it comes to character portrayal. The most difficult, and rewarding part of writing, in my experience, is being able not just to describe what needs to be described, but in a way use absence of information to enable readers to fill in the gaps. The art of illusion. Some writers spend a lot of time on character description – by show and tell, preferably more by show. These works are often centrally concerned with characters – this is what these writer's readers want – and is often motivated to draw out emotions, states of mind, etc, that simply cannot be invoked by pure, plot-driven narrative. This is goodness. On the other hand, there are works of literature that might want to emphasize theme, or, like Tolkien, plot (a tale, a yarn). Needless to say the permutations of what lies between are virtually limitless.
Regardless of how much characterization a writer wants to drive, in combination with the many other elements of what makes a piece of fiction, there is nevertheless a balance required, and good craftsmanship. LOTR wasn't devoid of characterization, and there certainly are many characters who come across vividly. But a lot of it comes from Tolkien's skill as a writer who knows how to craft 'absence' of information. Tolkien liked the narrative style (hey, have a go at the Silmarillion), and he stuck to his brand of voice. The key here, is that he found, within his voice, the sweet point – the balance, in LOTR (and the Hobbit, and fragments of work he did not publish).
Does this mean Tolkien should have won the Nobel Prize? No. I don't believe so. I think the Nobel Prize isn't geared toward the type of fiction Tolkien wrote – it represents, ideally, a lifetime's work in experimentation and exercising of skills in virtually all facets of fiction. It is also, quite frankly, a literary award in the most pure, snobbish sense. The Hugos, Nebulas, Bram Stokers, etc etc cater for genre fiction, and where there is a little (and I emphasize, little) more flexibility with regard to where along the literary spectrum the sweet spot is required (I think of Paulo Bacigalupi's The Windup Girl, as a perfect example of all the ideals of 'literary' fiction in genre fiction).
So, how much detail does a character need? Answer, it depends. But to achieve the 'sweet spot', there is just as much effort in determining what is written, from what can be drawn from what is not.