Characters are, of course, vital to any story. If it weren't for them, there wouldn't be anyone for things to happen to. Characters provide the story with depth. They give meaning and motivation to the plot. They provide the reader with someone to identify with and root for as well as an emotional hook to spur things along.
However, characters are not the be all and end all of a story. They are not a substitute for a plot. A good story may include character exposition and revelation. They may even go so far as to feature a character sketch. But stories that turn out to be entirely character sketches invariably are static, unengaging, and lacking in anything like resolution. In point of fact, they just sit there doing nothing.
Unfortunately, character studies as a substitute for plot have become very popular of late; if not with the audience, then certainly with writers. This is particularly true in the field of television drama. Writers particularly like them because they don't require stories that must hold together through carefully plotted logic. It's so much easier to indulge in emotional word pictures. The series Mad Men, which I enjoy, by the way, has almost no plot at all. Every episode is nothing more than the examination of this character or that and anything that resembles a plot is really just a tease to get the viewers to tune in next week. If this weren't the case, then the threatened revelation of a secret past, a doomed romance, or a collapsing firm might not be so conveniently forgotten until needed again, as is the standard practice at Sterling Cooper Draper Pryce.
It also happens on too many series to mention. Lost, Doctor Who, V, The Walking Dead, and so on and on all make plot take a backseat to character–and in the case of The Walking Dead, acting to emoting.
But that is a topic more suited to a theatre blog.
To put it simply, character is vital to a story, but it is not the most important. If character is used in service of the plot, it is a tremendous asset. But when plot is made subservient to character, the results are dire.