Gandalf: Confound it all, Samwise Gamgee. Have you been eavesdropping?

Sam: I ain’t been droppin’ no eaves sir, honest. I was just cutting the grass under the window there, if you’ll follow me.

Gandalf: A little late for trimming the verge, don’t you think?

Sam: I heard raised voices.

Gandalf: What did you hear? Speak.

Sam: N-nothing important. That is, I heard a good deal about a ring, and a Dark Lord, and something about the end of the world, but… Please, Mr. Gandalf, sir, don’t hurt me. Don’t turn me into anything… unnatural.

- Lord of the Rings: The Fellowship of the Ring (IMDB)

Eavesdropping and people watching are a good ways to both generate story ideas and improve your dialogue writing skills. Listen to people. Watch people. Do it in line, at the mall, at the supermarket–people act nutty at the supermarket. Take a walk downtown and just observe. Keep an eye on how fans behave and talk at ballgames. Sit outside and check out how people interact with their dogs when they walk them. Watch people when you drive or ride in a car; people sing, put on make-up and do all kinds of wacky shit at stoplights and at traffic jams, or even while they’re driving.

Just try it–what do you have to lose? After a while, you will do it so well that not only will you go undetected, but you will also eavesdrop/people watch instinctively.