The best way to write exceptional dialogue is to develop an extraordinary concept and story peopled with fascinating characters. The characters themselves will then tell you what they need to say to make the play come alive.
The number one weakness of new plays is overwriting.
Ideally, characters in a dramatic story only speak when they’re trying to overcome an obstacle to their wants and desires. They only speak to overcome a constraint to what they want.
Some dialogue serves to expose information the audience needs in order to understand the action of the story. This expositional dialogue is written in such a way as to spur other characters into action. Characters also argue over the information instead of positing it in a straightforward (boring) manner.
Every word of dialogue should ideally advance the story or expand characters. This applies to jokes, poetry, etc. All dialogue should either advance the story, expand character, or illuminate theme.
A dramatic story is all about conflict, and so must be most of its dialogue. The dialogue exhibits, illuminates, develops, and helps to resolve the conflict of the story – argue, argue, argue.
Drawing extraordinary characters to begin with helps to make colorful the resulting dialogue. But, the reverse is also true. Each major character should speak differently enough in rhythm, content, and word choice to be instantly recognizable and distinguishable from other characters.
Most dialogue should have a level of “subtext,” the meaning underlying the words. At all cost, dialogue that is too “on the nose” -- say what it means and means what it says – must be avoided. To the extent possible, characters should be slightly oblique, obscure, and abstract when getting at something. The extent of this depends on the genre of the play and the nature of the scene.
No matter the genre or style or situation, humor adds to the situation and makes the script more readable and interesting to follow. The trick is to be funny without simply trying to be funny. Almost anything can be made funny, depending on how it’s written. The great danger, though is the inappropriateness of humor, which can tend to offend, turning audiences off.