The narrator in The Yellow Wallpaper reveals things to the reader directly through her narration. Consider these examples:

She feels that her isolation is harmful to her mental state. She reflects:

I sometimes fancy that in my condition if I had less opposition and more society and stimulus...

She is clear here that she longs for company and socialization, which is denied to her through her husband's control of her health. He holds her prisoner in their home, which leads to another example of direct characterization...

The narrator doesn't get the support she needs from her husband. When she tells John what she needs, this is an example of the support she receives:

John says the very worst thing I can do is to think about my condition, and I confess it always makes me feel bad.

Asking a depressed person not to think about being depressed is like asking a starving person not to think about food. Her husband ignores many of the realities of her health and ignores his wife's requests for change. All of this leaves her feeling even worse.

We also learn things about her through indirect characterization.

The narrator finds peace in nature, which she is locked away from. Consider this line:

Out of one window I can see the garden, those mysterious deep-shaded arbors, the riotous old-fashioned flowers,
and bushes and gnarly trees.

Out of another I get a lovely view of the bay and a little private wharf belonging to the estate. There is a beautiful shaded lane that runs down there from the house.

Although the narrator doesn't directly tell us that she enjoys the peace found in nature here, we can infer this fact about her based on her descriptions of what she sees through the window.

The narrator's mental reasoning abilities begin to deteriorate over the course of the plot. Note how her initially loving and submissive feelings transform closer to the end of the plot:

The fact is I am getting a little afraid of John.

He seems very queer sometimes, and even Jennie has an inexplicable look. It strikes me occasionally, just as a scientific hypothesis, that perhaps it is the paper!

This is after she has begin to "see" a woman hiding in the wallpaper in her room, and instead of questioning the reality of that, she turns her suspicions to John. She begins to think that perhaps the paper itself is influencing them all, showing a clear pattern of decline in her abilities to distinguish the truths of reality.

What are examples of direct and indirect characterization in "The Yellow Wallpaper"?

For the sake of comparison between direct characterization and indirect characterization, my examples both describe the narrator, an unnamed woman whose husband John orders her to bedrest.

Direct characterization happens when the author explicitly notes traits that describe the character. It's generally used to reveal a character's motivation or emotional state. One in-text example of direct characterization is the line, “I am glad my case is not serious! But these nervous troubles are dreadfully depressing."

Here, the narrator states that she is suffering from depression and anxiety and, though she's happy that she appears to have a mild case, it still worries her. Her mood is directly stated and her motivation is clear: to recover.

Indirect characterization occurs when the author implies something about a character's motivation or emotional state using dialogue, description, actions, or relationships. One in-text example of indirect characterization is, "There are things in that paper which nobody knows but me, or ever will. Behind that outside pattern the dim shapes get clearer every day. It is always the same shape, only very numerous. And it is like a woman stooping down and creeping about behind that pattern."

In this section of the book, the narrator's observations about the wallpaper are getting increasingly delusional. It is implied, though not directly stated, that she's suffering from some form of psychosis caused (at least in part) by her husband dismissing her needs and confining her to bedrest.

With Charlotte Perkins Gilman's unreliable narrator, the depiction of the other characters involved in the narrative of "The Yellow Wallpaper" are, of course, tinted by her perspective.

1. Direct Characterization involves direct statements that give the narrator's opinion of the character.

One character for whom the narrator provides direct characterization is her husband, John. In the exposition, for instance, she describes John, who is a physician as

...practical in the extreme. He has no patience with faith, an intense horror of superstition, and he scoffs openly at any talk of things not to be felt and seen and put down in figures. 

Further in the story, the narrator describes her husband as

so queer [meaning strange] now that I don't want to irritate him.

This description is rather incongruous with the early one of the exposition, a fact that indicates that the narrator is probably interpreting what John does in terms of her own perceptions.

2. Indirect Characterization involves several methods:

• a physical description of a character
• a description of the character's actions
• a recording of the character's thoughts, feeling, and speeches
• a recording of other character's reactions and comments about the character

Gilman's narrator provides her own characterization as she records her thoughts, feelings, and words in a journal.  It is from these recordings of the narrator's perceptions and feelings, that the reader witnesses her gradual breakdown. For instance, at first the narrator writes that she lay awake for hours

...trying to decide whether that front pattern and the back pattern really did move together or separately.

As she continues to scrutinize this wallpaper, the narrator notes that

There is one marked peculiarity about this paper, a thing nobody seems to notice but myself, and that is that it changes as the light changes.

Later, the narrator decides the front pattern moves,

...and no wonder! The woman behind it shakes it!

Sometimes i think there are a great many women behind, and sometimes only one, and she crawls around fast, and her crawling shakes it all over!

These observations of the narrator become even more bizarre as she feels that the woman tries to escape from the hideously colored wallpaper as do others, and as she does.