Direct and indirect characterizations are essentially the difference between "showing" and "telling" when it comes to introducing attributes of a fictitious character to a reader. In literature, information about a character given via the narrator is a direct characterization, whereas indirect characterization involves things the reader learns about the character through their thoughts, words and actions.
When it comes to spotting an indirect characterization, it can be helpful to use the S.T.E.A.L. method. This method encourages readers to pay attention to key factors in order to gain a better understanding of a character. "S" is for "speech," what the character says and the way in which he speaks. "T" is for "thoughts," what can be learned about the character via his private thoughts or feelings. "E" is for "effect," how the character affects other people, and how others react to him. "A" is for "actions," what can be determined by what the character does, or how he responds to certain situations. "L" is for "looks," what can be ascertained by a character's appearance.
With indirect characterization, the reader learns about a story's characters through the things they say and do throughout the story, whereas direct characterization is information explained to the reader via a narrator. While direct characterization can be useful in trying to summarize a situation with a bit of brevity or move the story along, indirect characterization is the more vivid approach, and is typically more effective in causing the reader to become engaged with the story. An example of direct characterization would be, "Brad was attracted to Jessica," while an example of indirect characterization would be, "Brad glanced over at Jessica and was immediately captured by her gorgeous blue eyes, porcelain skin and the cute way her nose scrunched when she laughed."