Instructions
Load a saved GTA4 game or start a new GTA4 game in which you want to create an avatar.
Press "Up" on the game controller to bring up your character's in-game cellphone. The cellphone menu will appear.
Choose "Multiplayer" followed by the multiplayer lobby of your choice. The list of 14 multiplayer modes will appear.
Select any option from the multiplayer modes list. Your options include player-to-player online games, ranked games in which you will be ranked against all other online players and party games, which is a non-ranked mode that is just for fun. Once your mode is selected, a screen with character customization options will appear.
Choose a gender for your character, then select the race for your character when prompted. Choose clothes -- your selections will be limited to several options at this point -- when prompted.
Choose "Confirm" after you have created the character look you want. You will then be returned to the multiplayer game, with your new character's look in place.