It's been a while since I played, so the details are a bit fuzzy. But essentially, you do, although the process is more like most MMOs than pen&paper. There's class/race selection as standard, then I believe there's a point-association method of generating stats, rather than rolling for each of them. And skills would be assigned as normal in D&D. At least, that's how I remember it.
There is a point buy system similar to 3ed (I haven't seen 4th edition) when you unlock drow with in game favor, you're given more points for all subsequent character generations. Hope that helps Bunker
Unless there were massive changes to DDO since the re-vamp to the free-2-play (which is ENTIRELY possible) then I couldn't have said it any better than Bunkermonkey did.