As I wrote my first erotic story Helping Him Cope last night I couldn't help but think, would people enjoy a development of the character or the development of the background more? In your opinion as a reader, how important is it that you can add pieces of your own imagination into the story? To me, as a reader its very important. I sometimes don't prefer that authors write down the race of characters and instead allow me to decided for myself. However, I do appreciate a detailed setting so I can imagine where these events take place. I think there is 1 huge problem with this though, vagueness. What constitutes something open-ended verses something too vague?
I think that erotica poses a different kind of challenge to a writer in that there is a choice between making it a closed-tale with definite characters and background/imagery or something more open-concept that allows the reader to "live the fantasy" by imagining that they are the main character, or creating the setting as their own imagination prefers. I prefer stories that keep things a little more open-ended with both.
For me, it's less about what the character looks like, or the location they are standing in, but more how they are feeling and interpreting the situation. A reader can probably relate to the emotional life of your characters before they can relate to the physicality of them.
Between the two you mention (setting vs character development), I much prefer stories that concentrate on bringing the characters to life. I want to understand their motives, dialogue style, and hopefully that gives a sense of realism to the dynamics of the story line.
As far as settings go, I want the basics to set the scene, but I don't want endless details. My mind tends to drift when I read too much about how a room looks, or scenery that is overly detailed (especially in a short story). I'm much more interested in what the people in the room are doing/thinking/feeling.
for me stories let me live through another persons eyes, so I have to say character over setting, but setting is important and should be balanced depending on the situation. If two lovers started kissing and stuff, they're not going to wondering what color the carpet is, which again detracts from me living through the character.