The imaginary avatars that are controlled by players in any RPG. The most difficult part of dice gaming well was to resist the temptation to not shred your character sheet when the character died. The root of this use should be clear upon reading Webby's writeup below; the 'character' is 'one of the persons of a drama or novel.' If we take 'novel' to mean 'fiction' and acknowledge that a well-played RPG should in fact be a drama (one unfolding to the players themselves) then the link is complete.

This use of the word has pervaded the RPG (and by extension, MMORPG, computer RPG, etc.) worlds, in the original form as well as extensions such as NPC and player character.