Hi Amber!
Character dining is any restaurant where Disney characters are actually at the restaurant and walk from table to table, greeting families and taking pictures with them. The characters range from Mickey and Goofy, to the Princesses, to Chip and Dale! Each character restaurant has designated characters for that restaurant. These are generally at what they consider "table service" restaurants.
The easiest way to determine which restaurants are character dining at Disney World is to click on this link, then narrow your search (the menu at the left) by checking "Character Dining" under "Dining Experience." The screen will reload with only character meal restaurants at the parks and resorts.
Hope that helps! Good Luck!
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