Dialogue leavens a story. It lifts it up and opens new possibilities. On the page, it beckons you -- all that lovely white space. In fact, many people skip to read the dialogue.
Unlike backstory, it doesn't tend to be a focus area for writers looking to make their stories into page turners.
But sometimes characters get verbose, rattling on, saying "hi" and "bye," being clever without a point, and repeating each other. Or, worse, the characters become creatures of the plot, inserting information the reader needs. All of these slow things down and turn conversation on the page into tedium. This is a waste.
The best guide I ever got on dialogue writing was this: It should be so enticing, you'd eavesdrop to catch every word.
The "every word" part is important. It speaks to selection and economy. Ever read a transcript of a conversation? Deadly. How people really speak is fine for a draft, but not good enough for a story.
Here are some more things to think about:
Starts and stops. I've been reading radio scripts lately, and I've been struck by how often people are greeted. And how often characters speak each other's names. In radio, there is a reason for this. It provides an indication of who is present. For novels, movies, and stage plays, greetings and the use of names are less necessary and probably should be cut. The same thing is true for goodbyes. It's natural to include these in a draft, but a good rule for revision is start the scene (and dialogue) as late as possible and end it as early as possible.
How characters should talk like real people. For most characters, dialogue is less formal. (Villains, according to Stephen King, can be an exception.) Generally, it is less fun to listen to essays and speeches and to find vocabulary in dialogue that sends you to the dictionary. Contractions are more the rule than the exception in dialogue. People also let sentences trail off (...) and are cut off by others (--). Sentence fragments are common. With these in mind, dialogue reads faster if it is in the vernacular and the exchanges are in bursts.
How characters shouldn't talk. If you've ever read a transcript, you've seen how meandering and repetitive real dialogue is. When people are talking, they get distracted and lose their ways. They constantly look for assurances that they've heard correctly and they've been heard. For the former, this should be avoided unless it serves the writer's purpose (for subtext or to set up beats). As for restating, this is usually excusable only if it is used for the poetic sound value. Removing these makes dialogue less "realistic," but less of a boring slog to read through.
Character, not narrative. A lot of writers think they can avoid the problems of delivering context and backstory by putting it into characters' mouths. Sometimes this works, but it's a device that should never be used in a false way. Older plays use minor characters to set up stories (butler and maid dialogue). While this may have been effective once, it seems creaky and obvious now. Sometimes, humor can make it work even today, but it's generally something that distances the audience. A worse failing for writers is having key characters step out of character to provide information. Damaging characters alienates audiences and readers in a lot of ways, but it also makes those who enjoy dialogue feel cheated.
Audience. When someone speaks, they are speaking to someone else. That provides focus and shading to the words that makes the story and its characters come alive. Even monologues should be aimed at someone specific. Make sure your characters are not just spouting off, talking to hear themselves talk.
Emotion and purpose. In real life, it's okay to ask someone to pass the salt or to ramble on in a stream of consciousness way or to talk at cross purposes. These can be used for effect by a writer, but most dialogue is stripped down to what is goal-oriented. Ideally, the characters speaking are at odds in some way, with maneuvering and conflict evident throughout their discussions. And, beyond the purposes of any discussion, the characters should be feeling something throughout. For us to be emotionally involved, they need to be emotionally involved. The best dialogue of all ends with an emotional punch that pulls the reader deeper into the story.
As you revise, attention to these thoughts on dialogue can make this, the most attractive part of the story for most readers, more engaging. The most important entry here is emotion and purpose. It can make up for failures in all the others. And it also is the one thing to think about most seriously before revision.
Anything can be fixed in a rewrite, but it is easier to identify with the feelings and what the characters want while drafting a story than it is to rework dialogue to express these after the fact. In fact, it is key to your getting inside your characters in the storytelling and making the experience more organic.