One of the basic traits of a character is their depth, or how complex they are. Some characters are two-dimensional Flat Characters, with one or a few defining traits that (at a glance) completely define who they are. Some are more complex and have Hidden Depths compared to their flat counterparts. A Rounded Character goes beyond being a stock character with some Backstory and Hidden Depths. They generally have a complex motivation driving them, and may act counter to what their 'type' would suggest. These are the kind of character that have to struggle with choice.
Now, this is not to say that they're the best character type, and any author who does not have a full cast of Rounded Characters is a hack. It would be nigh impossible to write a story with a sprawling cast of fully fleshed out characters, the audience just couldn't take it! That's why this kind of character is usually reserved for the main cast and their antagonists in Character Calculus, and even then, some protagonists don't need much characterization.
A Flat Character may evolve into a three-dimensional character if they are dynamic, and change according to what they experience. On the other hand, sometimes they don't (need to) change and remain Static Characters.