dialogue:  conversation between characters in a story, poem, drama, novel, or other literature used to give life to characters and advance the action of work.

 Punctuating Dialogue:

    A speaker's exact words are enclosed in quotation marks.
    Ex:  "If this were my own house, I should do as I please," said Martha.

    Paraphrased words do not need quotation marks.
    Ex:  Martha said that if this were her own house, she would do as she pleased.

    Commas separate quotations from words that identify the speaker.  The comma always appears before the quotation mark.
    Ex:  Molly cried, "Look out below!"
            "Molly," she cried, "look out below!"
            "Look out below!" Molly cried, "Falling object!"

    A new paragraph begins each time the speaker changes.   Be sure to indent each time.  Below are four different paragraphs.
    Ex:  "Where are you going?" asked Lucinda.
            "To the library.  Want to come?" replied Tom.
            "No, I've done my project already,"  Tom stated.  "I'm going to play ball for a while."
            "Lucky guy!"  shouted Lucinda gaily as she trudged toward the library.

    When a paragraph ends while a character is still speaking, the quotation marks do  not appear at the end of that paragraph.  However,  quotation  marks do appear at the beginning of the new paragraph.
    Ex:  "Don't touch that tree!  Do you hear me, children!" said he, bland and firm; and when the guest had gone, with quite another voice and manner:
           "If I catch either of you touching those apples you shall not only go to bed--you shall each have a sound whipping."  Which
    merely added to its magnificance. (Mansfield 196)
 

Source for last example:
 

Mansfield, Katherine.  "The Apple Tree."  Literature:  Timeless Voices, Timeless Themes, 195-197.  Upper Saddle  River,
    New Jersey:  Prentice-Hall, 1999.