From D&D Wiki
Traits are aspects of a character's personality, background, or physique that make him better at some activities and worse at others. In many ways, traits resemble feats: A character can have only a limited number of traits, and each trait provides some benefit. Unlike feats, however, traits always carry a corresponding drawback. In addition to their game effects, traits suggest characteristics about the character's personality that might lead to interesting roleplaying opportunities. Together with a character's class and feat selection, traits offer a way for game mechanics to encourage deeper character backgrounds and consistent roleplaying.
Traits serve as an interesting starting point for roleplaying, reminding players of their characters' most prominent strengths and weaknesses. However, roleplaying a certain aspect of a character's personality does not require possessing the trait. For example, a paladin can be honest and forthright without the Honest trait. The player should roleplay the character consistently even though the character's honesty has no effect on his skill checks.
A character can begin play with up to two traits, chosen by the player at the time of character creation. Alternatively, the DM can require players to roll on Table: Character Traits to determine the traits possessed by their characters.
As characters advance in level and ability, they might want to get rid of the traits that they chose at the beginning of play. Although characters cannot rid themselves of a trait directly, specific feats, skill ranks, or magic items can compensate for the penalties imposed by a trait. For example, an abrasive character can work on becoming more personable by spending skill points to gain a rank in Bluff and a rank in Diplomacy, thereby offsetting the drawback from the Abrasive trait.
If the DM allows it, players may add traits to their characters after 1st level. The DM might allow a player to assign a trait to her character after she has roleplayed the character in a manner consistent with the trait in question, or after a traumatic or life changing experience (after dying, a character might develop the Cautious trait or the Aggressive trait). If the DM includes this option, a character should gain a new trait no more frequently than once every five levels.
 Metagame Analysis: Creating Traits
You can create new traits, but be careful: Traits can unbalance your game. When creating traits, keep a few issues in mind:
- You should keep in mind that the traits variant is only effective if the benefits and the drawbacks of the traits are related.
- If the drawback and benefit of a trait apply to disparate or unrelated aspects of the game, it becomes too easy for a player to choose a trait for her character that provides a bonus on a commonly attempted ability check or skill check while the corresponding penalty applies to a rarely used or never used aspect of play.
Flaws are like the flip side of feats. Whereas a feat enables a character to be better than normal at performing a task (or even to do something that normal characters can't), a flaw restricts a character's capabilities or imposes a penalty of some sort.
A player may select up to two flaws when creating a character. After 1st level, a character cannot take on additional flaws unless the Dungeon Master specifically allows it (for examples of times when doing this might be appropriate, see Character Traits). Each flaw a player selects entitles his character to a bonus feat. In other words, when you create a character, if you select two flaws, you can also take two bonus feats beyond those your character would be normally entitled to.
Unlike traits, flaws are entirely negative in their impact on a character's capabilities.
 Metagame Analysis: Creating Flaws
You can create new flaws, but be careful: Flaws can unbalance your game. When creating flaws, keep a few issues in mind:
- A flaw must have a numeric effect on a character's specific capabilities. Flaws with primarily roleplaying or story effects have unpredictable effects on game balance.
- Flaws are generally bigger in magnitude than feats. That's because players always choose flaws that have the least impact on their characters, while taking feats that have the most. For example, while a feat affecting skills grants a +2 bonus on two skills, its counterpart flaw might impose a -4 penalty on two skills.
- A flaw must have a meaningful effect regardless of character class or role. That way, a player can't reduce the flaw's importance through multiclassing. For instance, a flaw that only affects spellcasters might seem reasonable - but for nonspellcaster characters, the flaw likely proves meaningless. Even if you restrict the selection of such feats to characters of specific classes, a player can easily select a spellcasting class at 1st level, choose two flaws that apply to spellcasters, gain the bonus feats, multiclass into a nonspellcasting class at 2nd level and thereafter proceed as a primarily nonspellcasting character. The player has sacrificed a level to gain two bonus feats, a tradeoff that appeals to some players.
- Similarly, a flaw that penalizes a character's Charisma based skill checks only has a significant impact on the party spokesperson - the quiet fighter or barbarian likely won't feel any impact from the penalties.