Direct characterization is when a narrating character, another character or the text simply describes another character with direct adjectives.
Nick describes Gatsby as smiling understandingly in chapter 3. He notes Gatsby's smile several times in this chapter. These smiles show obvious happiness. The word understandingly is descriptive of Gatsby.
Nick describes Gatsby further as tan-skinned, clean-cut, and as one who did not drink. Gatsby stood alone and had no girls swooning on him like the other men did. It was as if it was understood not to flirt with him.
Just for an example of indirect characterization so you can see the difference... Gatsby calls everyone old sport. This shows how he want to be familiar or friendly with all he meets.
Direct characterization of the character, Jay Gatsby, in the novel, The Great Gatsby, would consist of anything that the narrator, Nick, says directly about Gatsby. Direct methods of characterization include description and/or commentary, by the narrator, of or about a character.
Indirect characterization would be dialogue or actions that characterize or reveal what Gatsby is like. Direct characterization is Nick telling the reader what Gatsby is like.
An example of direct characterization by Nick, the narrator, occurs on page 101 of my edition:
As I went over to say goodbye I saw that the expression of bewilderment had come back into Gatsby's face, as though a faint doubt had occurred to him as to the quality of his present happiness. Almost five years! There must have been moments even that afternoon when Daisy tumbled short of his dreams--not through her own fault but because of the colossal vitality of his illusion.
Nick tells the reader that Gatsby's illusion of Daisy and their past relationship is "colossal," that it contains "colossal vitality." This is direct characterization. He also tells the reader that Gatsby is bewildered--that, too is direct characterization.
Of course, since Nick is a first-person narrator and is somewhat unreliable, you should be aware that this is a conclusion Nick is drawing about Gatsby--and it's possible he's wrong.