I remember my first critique even though it was on a story I received #$ (cough, clear throat) years ago in high school. The critique was in response to a short story assignment in my freshman English class. I never did like that classmate.
As a writer, living in a vacuum is a terrible thing. Beyond reading everything in your genre that you can get your hands on and books and articles on the craft, letting others read your work is painful and helpful at the same time. There are a myriad of ways to get your work critiqued. Join a local writers' group or an online group where you trade chapters and critique each other's work. DO NOT ask your family or friends for their opinions on your stories unless they are some sort of professional writer, editor, etc. They will tend to be too nice and while their comments may boost your ego, they won't help you improve your writing.
So, you've joined a Critting group (you're critiquing partners are now know as Critters), how do you, as a writer and critting partner, provide useful feedback? DO NOT be too nice. That's not helpful at all. "It was great. I loved every bit of it," will not be useful to your partner and while again, it may be an ego booster, it won't help them improve their work. If it's true and you can't find a thing to say, that's amazing, but chances are good it's not the complete truth.
Also, DO NOT be mean. Remember that the story may not be to your taste, but look at it with a professional eye, not a personal one. Many people crit in Word and use the bubble comments. Personally, I prefer to highlight. I use one color for passages I think need work and another to highlight areas that I find well done. Don't forget praise! Not only will it keep your critting partner's spirits up when they see all the yellow highlights (stuff they might want to revise) on the page, but it helps show them what they're doing right, in your humble and honest opinion.
Start with the big picture. Are the characters' actions consistent and believable? Are the hero and heroine likable or at least relatable? Does the plot make sense or is there too much coincidence and literary license going on to make it believable? Is a scene or chapter moving the story forward rather than being a snapshot of life with no conflict that moves the tale along? If you feel comfortable, pay attention to the technical details of writing -- grammar, punctuation, use of dialogue tags, adverbs and adjectives, run-on sentences.
Some writers will ask you to pay attention to certain aspects of their writing while others prefer an intense, full crit that covers all the areas above. Most important is to be honest without being a butcher. Don't say, "I hate your character." Be specific. Say, "Your character is difficult for the reader to relate to because his motivation is not explained."
On the other end, some of the critiques you receive will hurt. Someone has judged your baby, your precious that you've spent hours and a bit of your own blood to craft. Take a deep breath, put the crit aside for a day or two until you can come back and look at it rationally. Remember that these are only suggestions and it is ultimately YOUR WORK. Don't take outside advice and alter your story unless you feel it makes your writing better. If a suggestion changes the fundamental nature of your voice or style, that is hurting your story more than helping. Ignore the well-meant advice and move on.
While a crit may make you want to punch a wall or the critter, remember they're meant to be helpful, a tool t make your work better. Like life, even the bad stuff can help make us stronger.
Visit my blog on writing at http://lilabarton.wordpress.com/
And my blog about my stories at http://lilabartonromance.blogspot.com/