Carradice: You objectificate a person, real or fictional, when you treat it as a means towards an end, instead of dealing with it like another fellow human, with a respect for her or his rights, wishes, dignity, dreams and aspirations.
First of all, you can't objectify a fictional character, because a fictional character is ALWAYS a means toward an end - be it telling a story, arousing erotic feelings or disgust or anything else. A fictional character is created by the artist to serve a purpose. And they have no life of their own, no dreams and worries and aspirations and no, no dignity other than that which the recipient creates in their mind.
And if we talk about real people, this happens all the time. The employee is just "a human resource" (at least in large companies), a soldier is "the smallest unit" or a "wet target". For the bus driver I'm just a passenger. For the cashier in the supermarket in just another customer - and the other way around - for me she is just another cashier.
We are constantly reducing people to their (current) functions and thus "objectify" them. It's a necessity for us to simplify the world around us to be able to process it. Sometimes less objectification would certainly be good - the world would certainly be more peaceful and fair if we saw each other more as people than "human resources", enemies, "walking wallets"... you name it. The communist idea is basically founded on that premise - but it's an unrealistic idea.
Still we have the choice and responsibility how to deal with the fact that we all constantly reduce other people to their immediate function or role. We can treat them with politeness and respect or like automatons or moving obstacles. See also "Golden Rule".
Now this simplification and in the end objectification is something that happens on mutual grounds between people and it's no binary thing either. It happens in varying degrees and those degrees are ruled by the situation and "appropriateness" - social convention. The reason for that is that we
want to be anonymous objects for other people in certain situations and keep our individuality to ourselves.
Some examples:
In the village where I live, at least in my neighbourhood it is expected to greet people on the street - and each and every one. If you don't do that, you will seem cold and distanced and unfriendly. On the other hand - do that in a big city and you will be seen as crazy, even creepy. In the village people let more "person" shine though while in the city people want to be seen as "moving objects" by other passers by.
Another example would be employer/employee relationship. In some companies the employee is "the thing that does the work" and the employer "the thing that gives the money". Both reduce themselves and each other to their respective roles. That may not be very cozy, but it works. In other workplaces the company is "one big family" where boss and colleagues actually take part in each others lives. This works too. Some people prefer the first way, some the second, and many something in between. The problem starts when people don't fit their role. Like when a "distanced" boss suddenly cares about the well-being of my family, or if an employees moves from a more cozy place to a colder company and tries to start making friends there - leading to uneasy feelings of encroaching with their colleagues.
So some people want to be seen as "I'm your tool, pay me and let's be done with it" while others don't want that - and the other way around some people just want "tools that work" human or not, while others prefer a more personal approach.
So we ourselves create "objects of us" - dissociations of ourselves for different purposes and often for "use by other people". We do this all the time and in varying degrees of voluntariness. Some people are less talented for this - and those are often called "authentic". Ironically people like actors or even sex workers who have a huge talent for that and are able to create personas (which are objects for a purpose) that are very far from "their true self" are also often called "authentic".
And this is where the line between "real people" and "fictional characters" blurs. We all create extensions of ourselves, masks we wear in different situations. These masks are objects that serve a purpose. For ourselves and for others.
We all know that Jack Sparrow is a fictional character that was created by writers, directors and Johnny Depp. An artificial object that serves the purpose to tell stories. But Johnny Depp on the Red Carpet is in a way also a mask, a fictional character. An object made for admiration or disdain.
"Lulu the escort" or "Linda Black the porn star" are a fictional characters who, in extension, may create further "means towards an end", dominatrix, girlfriend or victim. Behind all that may be a party girl, a boring wife with husbandhousecarchildrendog or a desparate single mother, we don't know and we're not supposed to - it would be stalking to try to find that out.
"The Queen" who is "not amused" is basically a fictional character - a mask or role that is "a means towards an end".
We are objectified and objectify ourselves which not neccessarily bad, but can lead to problem of course. Be it that roles are forced upon us (work life, stalkers), we lose distance to the masks we create (classic "actor's loss of identity") or other people mistake us for the object we created (the classic "actor beaten up for playing evil character" or "John falls in love with hooker").
This can of course not happen (except in extreme cases...) with entirely fictional characters from books or video games. Here the problem is more that the depiction may fuel stereotypes (all Germans were Nazis, all Muslims are terrorists, all American soldiers are heroes...) but that is an entire new topic altogether.
So sorry for the wall of text...
TL;DR: Objectification is something that happens all the time, it's part of the world and not good nor bad in itself. Also all fictional characters are objects, a means towards an end.