|And if you interrupt me writing, your character will die.|
Reading how other writers create their characters or write their books is always interesting to me. Many authors are more visual than I am: they see the scenes and images of their story in their heads, they have exact depictions of their characters, down to being able to find photos online to show. And many times, they base characters on someone specific.
Often, this sort of character design will be based on people that the writer knows. Friends, family, lovers, childhood school mates, and so on are remembered and planted into books. Their personalities and behavior are mined for details to give to characters, enhancing their believability and depth.
This can be done as a tribute or a sign of respect, but it also can be used as a weapon. More than one author has put people they particularly dislike or that have recently annoyed them into books, then done horrible things to that character. Its a sort of revenge by proxy; I can't hurt you but I can feed you to the Tarrasque in my D&D module.
Its a useful device, because real people will have sometimes unexpected qualities. I've dealt with people who have really annoying traits, yet are still very lovable and charismatic. I've dealt with others who are very charming and smooth but were extremely unlikable. So taking people like that and putting them into your stories can create fascinating characters.
Sometimes I read where someone asked an author to be put in a book - some kickstarters even offer putting high donors into a book. Usually this isn't a good idea, unless you are very broad minded and willing to see an author do mean things to you.
I'm glad nobody ever has asked me to do that. Because I don't write that way; I don't use people as characters. Instead, all the experiences and memories and little ideas that occur as I go through life go into storage in my head and grow in there. Then when I write, the ideas pour out onto the page.
So people do show up in my books, but subconsciously, and mixed with other people. One aspect might stick in my memory and appear in a guard or a mage, or some other character. But there's no deliberate use of specific people, and I don't know if I could do it well in any case.
But it is a valuable skill, to people watch, to listen to conversations, to examine the personality and behavior of people you know. By doing so, you can grow to understand what makes them who they are, and how to craft characters that are as believable and interestingly varied as real human beings.