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Dialogue                 

The standard form for dialogue is to paragraph after every line of dialogue no matter how short. For example:

     "I heard she seen Elvis last week over at the Burger King in
Dismal Seepage." 

     "Yep. Like to fainted too." 
      "Well…' 

No matter how short the line, even one word, you paragraph. Also
standard is the use of quotes to open and close the actual line of
dialog. If you decide you want to do away with quotes, you should do
so for a good reason, not just for the hell of it. Some writers feel the
least amount of punctuation possible, including quotes, is good.
Cormac McCarthy writes like that . Most important to keep in mind is that you don't want confuse your reader. If that happens with the
removal of quotes, then it's a mistake.

You've no doubt noticed in the three sample lines of dialogue there were no basic identifying tags, which are another basic in the dialogue
format.

"Az-tec jewels," Rudy said. 
"Whut?" Old Ralph said. 

Obviously an identification tag does just what is says. It identifies the
speaker. This is the simplest form of separating speakers.
Readers becomes so used to tags such as the ones above or the
'he said,' 'she said,' tags that they don't really notice them, just like they don't notice punctuation if it's used correctly. 

The next step up from a basic identification tag is business.
"Business" is something the writer or narrator describes outside the
actual dialogue, that deals with actions, setting, reactions, gestures,
etc. Business can follow a line of dialogue or interrupt the dialog to
describe something in the scene. If you're in first person, then it's the
first person distant voice who uses business, not the close voice,
because the close voice will be involved in talking, not reporting. This
is a subtle point, but you need to understand that any business in the
dialogue or any identifying tag in dialogue is coming from the first person distant voice. If you're in third person it's easier to understand that the business and identity tags come from the distant voice, the
narrator who is creating the story for the reader; however, it too can
be done in the third close voice. 

Here's an example of a distant voice inserting business into a dialog
scene:

"Az-tec treasure, " he said. 
"Whut?" Old Ralph said. 
Woody grinned, ready for anything. He knew the only thing Old
Ralph liked more than watching television preachers and pledging
money he never sent in, was treasure hunting. 
Virgil looked closely at Old Ralph. "Az-tec treasure, man. I know
where some is." 

You'll notice in the dialog the third paragraph is a distant voice
interrupting the conversation and giving the reader more information
and introducing a third party in the scene, Woody. Also in that
paragraph, the distant voice is telling what Woody thinks, not
showing it. 

In the opening of the fourth paragraph, you have a line of business
describing how Virgil is looking and at whom. The thing you need
to ask yourself as a writer here is: who is the focus character. Then
make certain you give most of the business to that character. In this
case it's not clear yet who is the focus character because the
business focused on Woody, a non speaking character up to this
point. If the dialogue continues, and Woody begins to participate, and
he is given most of the business, then he's the focus character. The
clue you have here that Woody is the focus character is that the
dialogue was interrupted and Woody was the focus.

One more thing; if you look at those lines of dialogue, you can see that
they are spoken by the characters, but the entire dialogue, including
identity tags and business, is coming from a distant voice, but it's not
clear whether it's third distant or first distant. The way you make that
clear is through the style of the voice reporting the dialogue scene. For
example:

Now, thing is Old Ralph knew the odds were a thousand to one
that Virgil was pulling him in on another scam, but the man
couldn't back off from a treasure hunt. 
Old Ralph looked at him all squinty eyed. "Hows come you ain't
got it already?" 
Virgil shrugged one shoulder under this Clint Eastwood poncho
he'd taken to wearing after watching a week of spaghetti
westerns on the teevee. "It's heavy, esay, I need some help." 

There are several subtle clues here that this is a first person close
narrator relating the scene to the reader. In the opening paragraph
the phrases, 'Now, thing is…' and 'but the man' give the narrative
voice here a style of speaking, and an attitude toward the other
characters, which is close, not distant. A distant narrator would have
used 'he' instead of 'the man' and wouldn't have introduced the
sentence with a phrase like 'Now, thing is…' The phrase 'this Clint
Eastwood poncho' is also a close voice phrasing due primarily to the
word, 'this,' which also expresses an attitude. If you do this throughout the entire story, the close first person voice will have a distinct narrative style plus an attitude. 

Another point to notice in the example is that every shift is
paragraphed, speaker to speaker or speaker to narrator to speaker.
And always make certain you connect the business to the character it
describes. For example:

"Hey, man," Virgil said, "this old dude's been braggin' all over
about his Az-tec jewels man. There mus' be a ton of it." 
Old Ralph looked at Woody again. "How many ounces in a ton,
Woody?" 
"Not much in an Az-tec ton," he said. 
"Old Ralph sipped at his Coors. "Who's this old dude who says he
knows where it's at?" 

In this example you'll notice that you can move the identification tags
around; they don't have to always follow the line of dialogue. Think
about when you've been reading dialog, and you come to several lines
from one character, and then at the end of the dialog ueis the tag, 'she
screeched.' That means you have to re-evaluate or reread the lines
you just read because there was no indication of how those lines were
delivered at the beginning. This is poor writing and it's another
example of how poor writing jerks the readers out of the fictional
reality of the story. Move your tags around where they will be most
effective.

Giving the character's dialogue style is tricky. These characters use a
vernacular of their own, but if you overdo it, the language becomes
self parody, so you have to find ways of just giving it a touch here
and there. Dropping ing endings for example, or endings such as 'mus'
instead of 'must.' Basically you try to use the rhythms of actual
speech, the music of the language.