Good topic, thanks for sharing the image. That's a great reference point. I've always found race creation to be a really interesting process, since it's too easy to make everything overly human-like because the basis of our writing is still founded on human understanding of culture and societies.
Usually when I'm designing a race, these are some of the main steps I do:
1. Layering together a few contrasting ideals, government types, and/or other forms of inspiration. For example: let's say you have a Supremacist Philanthropist Monarchy. This could be a society of beings that believe they're superior to everyone, and highly value family bloodlines. At the same time, due to their self-proclaimed superiority, they put a lot of time and energy into helping out those who are "inferior" to help enlighten them. Naturally some would greatly appreciated the help, especially if their race has poor self-esteem or is underdeveloped in general. In contrast, strong races that can stand on equal grounds with differing values may dislike this race, because they feel their approach is fine and they don't need to be "enlightened" by anyone else.
2. How long do they live? The importance is variable depending on the setting and other racial elements. For a Supremacist Philanthropist Monarchy, then having a race that only has a lifespan of 30 years vs a lifespan of 300 years would create *very* different dynamics. For sake of example, let's say they only live 30 years, so they're constantly under pressure to keep the royal bloodline going and in turn have tons of children to compensate for natural death, assassination, or even lack of interest or talent by some of the children in leading their race.
3. What do they look like? Whether this is fantasy or sci-fi will play a lot into the impact this has. I usually like to keep plenty of "traditional" races in the mix, so people can relate to and understand them better. But I also like to have a handful of strange or exotic ones that break the norms of things like standard fantasy dwarves or space elves. Adding to the example, let's say they're three-armed midgets (a third of the size of an average human), and have one large right arm and two small left arms (or vice versa, but never more or less than three arms total).
So you now you have this race of little creatures that think they're superior to everyone, meaning that races that are more physically large and/or value size culturally will have less respect for them. In space, size can be less of a factor militarily overall (though small creatures need less space/resources with similar efficiency), but will still impact racial relations in diplomacy. In fantasy, when rooted to the planet and without hulking spaceships to hide in, then physical traits become a much more important role all-around. More time should be put into looks, but this is just for sake of example.
4. Racial quirks. Whether it's visual, language, or an odd habit/custom, I usually like to give races (especially more unusual ones) some kind of quirk that defies human norm, but is perfectly normal for this race. If I want it to feel comical, maybe they greet each other by slapping each other's faces. That'll certainly piss some people off. If I want it to be serious, then I'll aim for more awkward, bizarre, or even disturbing depending on the kind of reaction I'm trying to get from the reader.
Adding to the example, let's say this race of 3-armed midgets spend a mandatory "silence" period every day of 7 hours straight, and disturbing it in any way (no matter what the emergency) is considered incredibly offensive and in some cases a criminal offense worthy of death if it's in connection to the Monarchy. Slightly on-topic to this, that would create a military weakness that other races could take advantage of, and is worth noting if they were ever involved in combat. And if you're allied with them, that could be a hassle to factor in for a joint war. Past the military impact, one could also brainstorm cultural or even biological reasons for why they would do it.
5. What are they called? This one can actually tie hand-in-hand with language and culture to a degree. Even though everything is technically written in English for the reader, if you make a certain ruleset for names, locations, and such, then one should try to reflect this in the name of the race itself if possible. Additional, the name of the race can also more subtly impact a reader's impression of it.
If you call them the Jarza'konn, that has a little more heft to it. If you call them the Yillupo, that feels a lot lighter. Again, it depends on the emotion you're trying to get out of the reader, which you usually want to connect to the race. I strong, prideful race you want to give a different impression than a shy and self-conscious race. Mainly this is for sake of the reader, to make it easier to digest and remember not only the name, but the other elements of the race. For the example, we'll call this race the Cenrahh, which is attempting to have a slighter more elegant feel without feeling too heavy or light, since they're a smaller race with a lot of self-pride and cultural tradition rooted in their monarchy.
I'll use those five basic steps as a stopping point for now, and combine them together. What you have is the Cenrahh, a Supremacist Philanthropist Monarchy of small three-armed creatures roughly 1/3rd the size of an average human. They have a lot of self-pride, and spend much of their time and resources on aiding other civilizations who they view as inferior to themselves. With a lifespan of only 30 years on average, having a large number of children is normal, especially within the royal bloodline to ensure there's enough redundancy that the line will never die out. For a period of 7 hours straight every day, they are required to spend a period of silence and reflection, that is incredibly offensive to interrupt. And if you interrupt someone of the royal bloodline during this period, you risk death regardless of whether you're of the same race or not. In rare occasions you may be spared.
Now all of that still simplifies the process, but are some of the bigger elements I look at first and acts as a core starting point with the race. From there, I might ask questions about the race, to get myself to think about other elements. Some of those questions are things listed in Steve's chart to cover more direct interactions and other habits. Other questions usually lean a lot more towards military and politics, so it's easier to understand how they will act in a broader way with other races. Once I have multiple races created, then I start looking at their outlines and brainstorming how they might logically interact with each other.
I don't always follow that 5-step process strictly, and will make extra notes if I think of ideas along the way. But in general I always cover all of those parts for any race; even one I just mention the name of once. Then I expand it from there as needed. How much time, energy, and detail I put into a race design mainly depends on the kind of role I want it to play in the story. Races with a central presence in the plot will be much more fleshed out. Races that are only glancingly mentioned don't usually get the same treatment (I have limited time, and writing is just a hobby). However I always write up more about a race than is ever usually revealed, and always make sure to consistently reference and follow any rules I set for them.
Well this turned out a lot longer than I expected. Hopefully you find something helpful from it.
