I voted for a combination of baby name books and friends and family names... but mostly I just use my imagination!
I used to have a very cool baby name book called the Baby Name Personality Survey, which had listings in order by traits. The traits were taken by surveys. I guess people were asked, "What do you think of when you hear this name?" Lots of traits were predetermined by pop culture, as I recall. (For instance, "Lucy" was thought of predominantly as a funny redhead.) That book used to be a great help. (Notice, I said USED to, since a friend borrowed it, has never given it back, and has since moved away!)
I still occasionally use online baby name sites.
Sometimes I use names or parts of names from RL friends. For instance, In "Love Thy Neighbor," the surgeon is named Dr. Huang after my best friend who is currently in Med School. In the story I'm currently writing, there is a nurse named after a co-worker of mine, and a counselor named after one of my BRs. I don't generally give HUGE character roles to friends & family members... they are mostly cameos.
Mostly I just use my imagination and something comes to me. The most developed imaginary characters I've written to date are Adam Whitney and Elliott Newman (of "Love Thy Neighbor"). A.W. sounded like an all-American kid to me, while E.N. sounded like a snooty rich kid. I try to pick names that reflect the personalities, even before you start reading about them.
-Wanda "Just my two cents" Detroit
