Well first off, to make realistic characters, such as a human face for example, you need to know basic anatomy of the underlaying muscles. Have a gander at this:
(taken from my good friend jango's site). As you can see the edge loops around the eyes and mouth. If you look at an anatomical picture of the face, the muscles under the skin is exactly like that. Making it great for facial animation.
Heres a picture of the muscles of the face:
Secondly, exageration is good! But not too much. Simply put, you dont want the character do to the most realistic walk ever, that makes it a bit boring. See, a walk, and subtle changes, like a jump in his step, or a slump of his back can set the emotion of the character.
Hope this helps. Post here, or PM me if you need anymore information.
Imagination is more important than knowledge.