For me, the first thing I look for in a story is believable characters.

I'm very emotionally tuned (or so I'm told), and so I have a constant tendency to "look at it through someone else's eyes".
If I read a book or watch a movie and I can't believe a character would ever react that way, it spoils the whole thing for me.

Once I've got a general story flow going, I start to think about what kind of people the main characters are (A bit about their past, major personality traits etc), and then run the scenario through my mind from each character's perspective to see if it would make for good drama, comedy, whatever.

So far I've only kept two or three characters going at once (with a few smaller roles thrown in for color), but I'm working towards being able to hold more in my head at once without mixing them up. I can feel as they do, I get angry, sad, laugh out loud (and people on the bus look at me funny). I brood, I obsess over this fictional situation from the character's mind, and then their thoughts and actions just seem to come naturally.

For all the science fiction, fantasy, and sex a story may have, it's ultimately a story about people. If your reader can't identify with the character's experiences or his reactions to them, then you've lost your audience.