My favorite bit is her idea of the "emergent properties" of conversation: "ideas that come up that don't properly belong to either person, and are really arising from the conversation." These ideas emerge in real-people conversation, but how does one create them in fictional dialogue?
I think of dialogue as a distilled version of real conversation. In (my) fictional dialogue, there's a lot less reiteration and the pace is quicker.
When I edit my own dialogue, mostly what I'm doing is taking out as much of the repetition and twisty paths of the conversation--not all of it, but enough so that the main points of what I'd like to get across stand out. I leave enough of the "real" type meandering to give the illusion of real people talking. Like the frame for a picture, perhaps, if the picture is the main idea I want to give the reader. Then I try and intensify the individuality of each character's speech, if it's not already evident in my draft, and play with tightening up phrases, rhythm, etc., just as I would with any other prose.
Two piece of dialogue advice I've received are:
1) Dialogue should always serve at least two purposes (Josey Foo)
2) If you take out the name designations, you should still be able to tell who's speaking (can't remember source).
Excellent things to aspire to.
Once, I tried to follow #2 by using a simple trick. I had two characters, and I looked at their personalities and assigned a dialogue quirk to each.
One guy, a stranger in a strange land who didn't want to reveal his fear for his life, never asked questions until he was near the breaking point, because asking questions would reveal weakness. He would obtain information in other ways, like making leading statements.
An older woman in a position of authority never had a single sentence of dialogue at a time; she always spoke in multiple sentences; she could order people around, or she could simply talk and no one would interrupt her. I could, in addition, show quite a lot about a situation if she gave only a one-word response to it. Though that project is on hiatus, I think the trick worked spendidly when I tried it.