Here's how that works:
- When you're the party leader, you'll see an Add button for any empty character slots. Clicking it will bring up a window with options to add a character of your own or invite another player.
- When you control multiple characters, you'll see a button with the portrait of your active character in the middle of the buttons for navigating and taking actions. Clicking the button will cycle through your characters.
- During story decisions, whatever choice you make applies to all the characters you control. You won't have to make a choice individually with each character.
- Other operations -- combat actions, chatting, visiting the Vault of Arms or Pool of Reflection, and so on -- take your active character into account.