I've heard a lot lately, from those in the know, about inner conflict versus exterior conflict. A lot of rejection letters are posted every day because writers have a difficult time figuring out the right balance. First let's start with the basics.
An exterior conflict is something your characters have no control over.
Examples: hurricanes, plagues, pestilence of any kind, being hit by a bus, getting mugged.
An internal conflict is more subtle. In this type, it's something your character is trying to overcome that is not readily apparent to everyone else. Or, if the character is not trying to overcome it, it's still a motivating factor for their actions. And you may not catch it immediately.
Examples: can't trust men, paranoid, overachiever, sexist, racist, scared of Peanut Butter.
Carrie, our Conference Chair, and I are HUGE, HUGE Monk fans. Discussion of the show often adds an hour or two to conference "meetings". Tony Shaloub's character is a great example of well-balanced conflict.
The homicides---external. OCD---internal. Blackout due to an earthquake---external. Germophobe---internal.
The writers of the TV series do a great job balancing these. It's a detective show but the internal conflict(s) of Monk keep you tuning into USA Network.
You have to keep these elements in mind when you're writing. It's vital that your characters have enough internal conflict to make them interesting and engaging. If your characters are flat, it may be because they don't have enough internal conflict to keep the reader engaged. You also need external conflict to keep the plot active and well-paced. Every story has to go somewhere. Both elements define character, but in different ways.
Here's an example from a hypothetical romance I just made up---
A hot firefighter (pun totally intended), named ACE, rescues a nurse, BUFFY, who looks like Heidi Klum, from a burning building. They are instantly attracted to each other. But she won't go on a date with him---her father, also a firefighter, was a deadbeat and left her and her mother with only one pack of Ramen noodles and two weeks until her mother's next paycheck. ACE won't take no for an answer. No woman has ever turned him down. When a flaming building collapses on ACE and he ends up in BUFFY'S ER, she sees that not all firefighters are alike. (*CUE HAPPILY EVER AFTER MUSIC*)
External---BUFFY'S apartment fire, building collapse and ACE's injury
Internal--BUFFY: all firefighters are deadbeats ACE: no woman will refuse him
Think about some of your favorite books. How did the author keep you up late? What made the characters so engaging? What percentage is external conflict and what percentage is internal?
A note of caution---Don't confuse internal conflict with baggage. There is an overlap, but I'm not suggesting you take a serviceable character and turn him into a boozing, womanizing fool just for the sake of internal conflict. Some emotional baggage may be okay, but too much may kill your manuscript. Most of us read to escape, remember?