Modernism was marked by a deliberate, intentional break with tradition. Modernism challenged established religious, political, and social ideas. In the wake of First World War, with its catastrophic bloodshed, it seemed that many old cultural certainties had vanished forever. Modernism sought to mirror the uncertainties of the time while at the same time adding to them.

Modernism emphasized subjective perception rather than objective truth. Modernists didn't deny the existence of objective truth, but they believed that an overemphasis on objective truth ignored the vast, hitherto unexplored depths of human subjectivity. Modernist authors such as Virginia Woolf and James Joyce used the literary technique known as stream-of-consciousness to elucidate the inner workings of the mind in its engagements with the external world.

Modernism focused on individualism. For the most part, modernists saw themselves as individualists, pitting themselves against a society in decline. As many of the old values no longer commanded respect, modernists looked to themselves as individuals to create their own values, both in terms of the art they produced and also the moral values by which they lived their lives.

Modernism was interested in alienation, loss, and despair. To a large extent, modernism arose out of the alienation caused by the First World War. The so-called lost generation of artists felt particularly alienated from the society around them. Many of them succumbed to despair, feeling that society was so broken that there was no possible hope of redemption. Much modernist work is characterized by a pervading sense of nihilism—that there are no absolute values and that meaning itself is difficult to discern.

In "The Case for the Ephemeral," G. K. Chesterton attacked both the idea and the name of Modernism, writing:

It is incomprehensible to me that any thinker can calmly call himself a modernist; he might as well call himself a Thursdayite.

Chesterton regards Modernism as shallow and snobbish in the same way that it is shallow and snobbish to look down on others because one has a newer car or more fashionable clothes than they do. An intellectual and artistic movement ought to have more to offer than being the most recent phenomenon, which, of course, Modernism no longer is.

While Modernism certainly has an element of snobbery in it, it is far from being the blind worship of progress Chesterton is criticizing. Modernity is clearly one of the principal themes of Modernism, but the great Modernist writers—including T. S. Eliot, Virginia Woolf, and James Joyce—are far from worshipping the modern age. On the contrary, they write very scathingly about modernity, constantly complaining that it is empty and vapid. The snobbish element of their attitude lies not in any pride at being up to date, but in their dislike of democracy as a central element of modernity.

In The Intellectuals and the Masses, John Carey argues that the obscurity and difficulty generally associated with Modernism are a direct result of this anti-democratic attitude. The advent of Modernism coincided with the rise of mass literacy, but the Modernists preferred an elite readership. James Joyce, Carey points out, even went so far as to write a book about the common man which no common man would be able to read.

Modernism is a paradoxical movement in many ways. It is certainly a reaction against Victorianism, but it is also a revolt against the twentieth century. Clement Greenberg, one of the foremost authorities on the movement, described Modernism in a 1979 lecture on the subject as the artist's response to an ongoing emergency. He continued:

Artists in all times, despite some appearances to the contrary, have sought aesthetic excellence. What singles Modernism out and gives it its place and identity more than anything else is its response to a heightened sense of threats to aesthetic value: threats from the social and material ambience, from the temper of the times, all conveyed through the demands of a new and open cultural market, middlebrow demands.

What Carey regards as snobbery, Greenberg sees as an ongoing quest for artistic excellence in an increasingly philistine and commercial atmosphere.

It's hard to establish exactly when Modernism began, but most scholars argue that the Modernist period began in the late 19th century and reached the end of its height by World War II. Some of Modernism's most famous authors include Ernest Hemingway, Virginia Woolf, James Joyce, Ezra Pound, William Faulkner, T.S. Eliot, Gertrude Stein, and F. Scott Fitzgerald.

In many ways, Modernism was a response to the influx of the revolutionary ideas of thinkers such as Darwin, Freud, and Nietzsche. Altogether, these individuals presented ideas that deconstructed important traditional foundations of society, such as religion, ethics, sexuality, and even the identity of the individual. Additionally, the technological advancements and chaos of World War I caused the widespread doubt that humanity was actually progressing; indeed, after the unprecedented violence of the war, many people began to believe that human society was descending into turmoil and meaninglessness. 

The Modernist movement began in the capitals of Europe, and it was concerned with exploring themes of alienation and dislocation in society, and with the struggle to find meaning and identity in a rapidly changing world. Artistic techniques of the period include Impressionism, Cubism, stream of consciousness narrative and more, and, through these techniques, artists sought to explore the fragmentary, suddenly messy nature of modern life. In general, much of Modernism grapples with the sense that, with the loss of traditional values, some vital aspect of human society was also lost. As such, much of the art and literature produced during this period incorporates the sensation of wandering and searching for some kind of value. It's hardly surprising, therefore, that Stein referred to some of the most prominent Modernists as "the lost generation."

what are the characteristics of Modernism in Literature?

Asked and answered.  Go to Literature/Modernism for a full discussion, and see the scholarship of Irving Howe on this subject.  Thoroughly covered in previous answers.  The text below is repetition for your convenience: 

This term, which originally simply meant “art and literature of these times” was frozen into meaning  the period approximately between 1850 and 1914, when the term “post-modernism” was coined.  (It’s good to remember that these terms are coined after the fact, by critics and scholars, not by the actual artists.)  It differentiated the current artistic impulses from the Victorian, 19 century, Industrial age; its primary features were a rejection of classical and Romantic influences in favor of modern (then) notions of Reason, human psychology, social equalities, and creative license; a re-examination of artistic forms such as free verse, nonlinear plots, and non-rigid forms; and a celebration of individuality vs. group identification.  The term causes confusion because it embraces each movement as art progressed.  Postmodernism refers to art that is about itself: self-conscious art, art that deals with its own forms as a subject--example: Unamuno’s novel, “The Fog (La Niebla),” in which a character in the novel goes to Unamuno’s house and asks not to be killed off in the novel.  A central, seminal study by Irving Howe, “Modernism in Literature,” answers the question “What is Modernism” thoroughly.

What are some of the major characteristics of literary modernism?

Critics will say that the modernist movement in literature is actually best described as a period rather than an a cohesive artistic movement. However, we can certainly identify a number of common interests to the writers of the modernist period. It is this set of shared interests that has retroactively come to define the idea of literary modernism.

Modernist writing often emphasized formal experimentation as a means to express subjectivity and the variability of "truth" in narrative.

That humans are alienated from true knowledge of themselves is the implicit contention of the stream-of-consciousness form of narration.

Virginia Woolf and William Faulkner are two clear examples of these notions at work. Their novels are characterized by dense, highly original prose presented in conjunction within unconventional narrative structures, often using the stream-of-conscious narrative method. 

The notion of subjectivity as the cornerstone of human experience was also an aspect of modernist poetry. Poets created new forms of narrative poetry, utilized broken structures and incorporating juxtaposition of ideas, feelings and languages.

...they attempted to model the fragmented nature of minds and civilization in their narratives.

T.S. Eliot, Ezra Pound and William Carlos Williams are examples of poets who are now considered to be modernist poets. 

Beyond subjectivity of experience and ideas of the difficulty of truth, modernism demonstrated a personal relationship with the past that was often at odds with the growing trends of urbanization and industrialization. Themes relating to this emphasis on the individual's place in (and relationship to) history include alienation and Fruedian psychology.