The first thing you need to decide is your character's name. You will likely fit in better if you choose a name suitable to the medieval fantasy setting of Avatar. When you connect to the game, you will be asked:
By what name shall you be known, adventurer?
Type the name you wish to use, and press <enter>. If you are immediately asked for a password, this means the name you chose is already in use by somebody else, and you will need to try another one. Otherwise, you will be asked to confirm your choice of name, by pressing <y>, then <enter>.
You will now be asked for a password. Pick something you will remember, as you will need this every time you wish to play the character. Type the password you wish to use, then <enter> again. When asked to retype your password, enter it a second time.
You will next be asked whether your character is Male, Female, or Neither. Your choice has no effect on gameplay, so enter the first letter of your choice and move on.
Next, decide which race you wish to play. If you are new to Avatar, it is strongly recommended that you choose one that does not have ** next to the name of the race, as the marked races are much more difficult to play. (In some cases, even very experienced players find them extremely difficult.) Those races marked with a single * are also harder to play than average. In particular, note that ents and firedrakes gain levels extremely slowly. Additional information on each race can be found here. Once you have made your choice, enter the three letter abbreviation for the race (this is the letters in  brackets next to the name).
You also need to decide which class you wish to be. Again, enter the abbreviation in  brackets to select one. Those marked with * or ** are more complex to play, although some new players are very succesful with them. Additional information on classes can be found here. You may wish to take your choice of race into account here, as some races will find certain classes easier than others (for example, giants, with their very limited skill at magic, will find the path of a mage much harder than that of a warrior).
Having chosen a race and class, you will be asked if you wish to see the game in color. Answer Y for yes, or N for no, to continue. If you make a mistake, you can change this setting whilst playing by typing <color>.
You will be presented with three screens of text. After reading each one, press <enter> to continue.
The final question in the character creation process follows:
Are you already an experienced MUDder? (y/n)
If you have not played any MUDs before, you should definitely answer <n> at this point. If you have, but are new to AVATAR, you may also wish to answer <n>. If you are an experienced AVATAR player, you probably don't need this guide.:)