There are ineffective ways to describe characters and effective ways to describe characters.
Ineffective: He had wavy, blonde hair falling lightly over dreamy, blue eyes that sparkled when the sun hit them. He had a perfect figure covered in lean muscle, complete with rock-hard abs.
Effective: He stood with more weight on his right foot than the left, and when he took a step toward me, he walked with a slight limp. Bright green stains covered the knees of his jeans, and his palms were muddy and scraped. He held his chin high, defiantly, as he gazed down at me. With a smooth movement, he turned the brim of his baseball cap to the back and wiped his sweaty forehead with the back of his hand. When he cocked a smile, I winced at seeing blood soiling his teeth.
The biggest, number one, most important rule when describing characters is to make every detail describe not only their appearance, but simultaneously reveal something about their personality. Telling us your character's eye color usually won't be relevant to their personality unless there's some kind of ethnic division where blue-eyed people are discriminated against or some of the like.
In my example above, look at the ineffective description. Can you tell me a single thing about his personality? Your answer should be no. Well, maybe we can gleam something from the perfect figure and muscle, but that's still vague. From that, we deduce either 1. he's narcissistic and works out to get girls, 2. he's some kind of athlete 3. his lifestyle revolves around being fit, such as being a gangster, bodyguard, cop, firefighter, stunt double. So really, you can't tell anything about him at all.
Now look at the effective description. This guy is limping, his jeans are dirty, his hands are dirty and scraped, he's sweaty, and his teeth are bloody. He was obviously just in a fight, or he fell down a set of stairs. But then it says that he held his chin high (proudly) and cocked a smile. For most guys who are injured like that, the way he's reacting to his injuries points to the conclusion that he was just in a fight, and he won (or he did some major damage to the other guy). See how that tells a better story about that character? See how much you can tell about him without describing his eye or hair color or the shape of his nose or the cut of his jawline?
Of course, mention their hair color and eye color if you really want to. Many times, that's how we tell people apart because those are very defining traits that usually don't change from day to day, but they become cliché when mentioned too often or with too much emphasis. If they have rainbow-dyed hair, then that might be a good thing to focus on because it defines their personality. Mentioning your character's brunette hair as if it's the only thing defining them really looks shallow. A person is more than their hair color or the shape of their face.
(Again, these so-called superficial traits can most definitely be mentioned in the correct context. For example, if in a society of tall, fair-skinned, narrow-nosed individuals you find someone who is short, pudgy, with a round face and thick nose, then you'd definitely want to mention those things because it sets that person apart.)
When talking about characters, since the readers can't physically see them, they need to have defining characteristics that are memorable. That's why hair and eye color usually aren't the greatest traits to describe your character with. If you have a large cast of characters, there will probably be several people with black hair, red hair, blonde hair, or brown hair. They get muddled together.
Example: In Eragon, the witch Angela is frequently described by her hair. It's red and frizzy, and she's the only character described that way. For her, the red hair correlates to a fiery, eccentric personality. It makes her different, so it's a good defining trait. Try to keep these defining traits to a minimum so you don't overload your readers with information. Give each character just a couple traits each that you can use as cue words when introducing that character the first time and for subsequent scenes.
In Harry Potter, (I can't remember this exactly—it's been many years for me—so forgive me if this is wrong) Harry has the lightning scar and round glasses. Hermione is buck-toothed, Ron has red hair and freckles. Hagrid is huge, Dumbledore has long hair and half-moon glasses, etc. Now, each time that character comes into a scene, if you use those words, the reader should know exactly who you're talking about. It keeps them from confusing characters if they can associate a few key elements to each one.
Think of unique traits to define your characters. Maybe one person always carries around a sharpie and writes on their arm. Someone else could always be chewing bubble gum. (In Death Note, L is always eating sweets, Mello always has a chocolate bar in hand, and Near has toys.) Maybe one character gets in a lot of fights, so their nose is really crooked from getting broken so often. Someone else has a really hideous haircut their mother made them get. Another could be chronically ill—coughing all the time. Someone could clap a lot when they talk. Another could have dimple when they smile, making them look like a child even though they're in their 20s.
Note: Make sure each character has a different set of defining traits/cue words. If two people are defined as buck-toothed, and that's their only defining trait, we won't be able to tell them apart. By all means, mention similarities when comparing and contrasting to another character, but make sure there are other traits unique to each specific character.
Use the physical characteristics in synergy with their personalities and role in the story. A character could be very short, but a brilliant fighter (Yoda!). Someone could be big and scary looking and be very serious and gruff. There could be a dark-haired magician with a big, curly mustache. Working with stereotypes here sometimes could benefit you. Work with them. Tiny motormouths, muscly thugs, a guy in a trench coat and sunglasses. You don't always have to be completely original. Visually, we seem to understand and relate to the stereotypes a lot, so those can be an avenue to explore in your writing. When applied to fictional characters, these are called archetypes. (Google character archetypes, and you should get a lot of results. They're very useful. James Cameron used a ton of archetypes in the movie Avatar, for instance, an a ton of movies have these. They're more for character roles than for description, but they may help you in creating a physical description that matches the role.)
So the key point here: the physical appearance of your character should match their personality. Don't give us a very timid, mousy character who wears booty-shorts, tons of brightly colored make-up, and hooker boots. Don't make a happy-go-lucky character wear all black with hair falling over their eyes. Keep it real and believable.
Things to consider about physical appearance (but which ones you do bring into your story depend entirely on the character and the story you want to tell. You won't and shouldn't talk about ALL of the following for every character.):
-What kind of clothes do they wear? What's the state of said clothes—dirty, ripped, soiled, clean, neat and pressed, immaculate, etc.?
-Do they have any injuries?
-Do they have a distinct defining feature—hooked nose (like Snape!) always buried in the pages of a book, thin lips always pursed into a line, etc.? (Usually, I advise people to avoid describing facial features, but when used in congruence with something else like here, they can provide a vivid image of the character, so use your own discretion with this.)
-Do they have an object they always carry around with them—a book, a doll, candy, a flask of ale, etc.?
-Any tattoos or special markings?
-Hats, jewelry, other accessories?
EXERCISE: For each trait listed below, make up a character and write a short physical description of them to portray the trait, like I did in my example at the beginning. You are not limited to just the traits listed; go ahead and add others to your description if you choose, but make sure the one listed is included.
1. Vain and Narcissistic
2. Dirty and repulsive
3. Triumphant and proud