Effective dialogue needs to read as a real conversation between your characters. Let the language of your dialogue be guided by the personality of each character, as each character will then possess a unique voice. When writing, consider the manners of speech you have observed people use in real-life conversations. Rather than writing dialogue from your own authorial voice, use these real-life manners as guides for the voices of your characters. This will help you create sincere, revealing dialogues.
For dialogue to seem realistic, it generally needs to be written in concise language. When writing, imagine the terse back-and-forth quality of real-life conversation, and apply this to your own writing style. When you want to convey a deeper element of characterization or theme, do so with subtle techniques of speech. For example, a character may simply state his current sentiments in a realistic manner of speaking. These sentiments can be explored in various metaphoric ways in the narrative portion of the text. The dialogue then conveys to the reader an elaborate meaning through simple character speech.
Use the style of your language to convey your characters' moods. Rather than placing an adverb outside of the quotation to explain the way a character feels, use the dialogue itself to reflect the character's emotion in a subtle way. For example, an anxious character might engage in a drawn-out, eclectic way of speaking, while an angry character might speak in short, stern words. In this way, the dialogue itself presents a realistic image that conveys your characters' feelings, which makes clarifying adjectives and adverbs unnecessary.
The Iceberg Theory is a technique of writing pioneered by Ernest Hemingway. Hemingway's style of dialogue is notably terse and drawn-out, sometimes carried out for several pages in succession. Through this style, Hemingway presents the reader with a realistic exchange between his characters, while underlying the dialogue are deeper elements of theme, philosophy, and character traits. This is the meaning of the iceberg metaphor, in which the dialogue text presents an image comparable to the tip of an iceberg, while the true the textual meaning is analogous to the majority of an iceberg that is hidden beneath the water.