How did Sir Arthur Conan Doyle create a character so real and life-like?

In a nutshell: he didn't! As is often the case, fiction stems from real life. In the case of Sherlock Holmes, Doyle's inspiration was Joseph Bell.
While Joseph Bell doesn't have near the fame of his fictitious counterpart, Bell was actually a pioneer of forensic science. Bell's unique skills at observation and deduction made him a celebrity and a famous lecturer in his homeland of Scotland.

This book traces the life and times of one of the most important, but largely overlooked, scientists who ever lived.