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Some of my favorite shows ever on TV are Sesame Street and The Muppet Show. They also happen to be a couple of my greatest RP inspirations (along with Mr. Rogers' Neighborhood), for the simple fact that each puppet on those shows are and were a fully believable character in their own right. Did you ever see who was manipulating Ms. Piggy, or providing the voice for Cookie Monster? Sure, maybe you knew who it was, but come show time, they didn't appear themselves. When was the last time you ever heard someone say the quote, "Do, or do not. There is no try.", and not think of Yoda? Did you also think of Frank Oz in the same instance? It is an awesome testimony to his superb RP skills that the premier way we have come to know Yoda is as 'Yoda', and not as 'Yoda the puppet with Frank Oz's hand sticking up his butt'. The puppeteers' trick is to control an object outside of their own physicality with such skill as to get those of us watching to believe that that object is alive.
In this sense, I think this is a much more difficult task to accomplish than being an actor. I'm not knocking the art of acting, mind you, not in the least. But through the lens of role-playing, this aspect can be a very daunting thing, and is why you'll never see or hear me berate anyone who says they don't know how to RP, or are frightened simply by the notion of doing so. I don't think anyone else should, either.
We RPers use a very similar tactic, in that we use a computer and its peripherals to control an electronically generated form to interact with other electronically generated forms. This is what I mean by the 'physical' aspect of RP, and this is what makes any answer containing "like acting" an incomplete answer. The above examples show the 'mental' aspect of RP, in that the believability factor of your controlled character comes first and foremost from your own mind, and is why I think "like a puppeteer" is a more complete answer to that vaulted question.
So, what is role-playing? Simply put, it is using the tools you have to the best of your physical and mental ability to walk your character through whatever MMORPG you are playing, thinking, talking, and acting as you want your character to think, talk, and act. Role-playing is the act of being a character, instead of merely having a character. And, in my humble opinion, it's the most fun way to play any massively multiplayer online role playing game. Role on!