Like its older sibling, Daggerfall, Morrowind allows you a tremendous amount of freedom in the type of character you create. Unlike Daggerfall, however, the race and sex modifiers (political correctness be hanged — the term "gender" applies to elements of language, not people) are actually implemented. Also unlike Daggerfall, character creation is built into the storyline rather than handled as a separate pregame process.
You have a little leeway in choosing your character's facial features and hair style, but that's about all. However, lest you feel too cheated and as a remedial lesson in probabilities, you have anywhere from six to sixteen different faces to choose from (it varies by race), plus about the same number of hairstyles, plus a choice between male and female. That totals out to somewhere between seventy-two and five hundred twelve possible combinations, depending on which race you choose. Mathematical niceties aside, the sequence of character creation runs like this:
Everyone starts with a base 30 points in each attribute, no special abilities and all skills at 5. Your race and sex choices will add a total of seventy points to your attributes and forty-five points to your skills. Each race has some sort of special ability associated with it. It may be a particular ability, a power that is usable once per day or a spell that all members of that race can cast. The effect of your character's sex is to distribute points a little differently. Generally speaking, males tend to be a bit stronger and females tend to have a bit more endurance. The exceptions to this are Redguards and Dark Elves (where females get more Personality) and Orcs and Argonians (where females are smarter).
Your choice of class will do several things. It will add five points to each skill in the specialized group (combat, magic, stealth) and make those skills easier to develop. It will add 10 points to each of your two favored attributes. It will also separate your skills into Major, Minor and Miscellaneous. Major skills start at 30 and are easiest to develop, Minor skills start at 15 and are less easy to develop and Miscellaneous skills start at 5 and are most difficult to develop.
Your choice of a birth sign comes last and puts the finishing touches on your character. It may add points to certain attributes, provide you with handy resistances or extra spell points, or put a spell or two in your spell book. All birth signs have some benefit associated with them and it's up to you to decide which one will do your character the most good.