It has far more character development than Xenoblade, in terms of volume, but there's a lot more characters. Basically, remember heart to hearts? Imagine now each character has a few quest lines, complete with fullly voiced cutscenes. These quests (kizuna quests) exclusively deal with the backstory and events surrounding each character. In addition, different characters have different amount of roles in the main story, and while the main story is short than Xenoblade, with less (in terms of volume) twists, it is on a much grander scale, involving the survival of humanity. There's also a number of significant, and smaller story lines involving the city, NLA, survivors, alien races etc that aren't in the main quests, but are side quests that develop the world and give insight into the different people, their lives, their problems, alien cultures, etc. There are quite a number and broad array of these quests. Then there are more mundane quests (like Xenoblade Wii's) that involved talking to people and gettings items etc, to help them set up a luxurious lingerie shop, or bring pizza to NLA etc.
In terms of structure, it's very open in that the format for advancing the plot is not positionally activated cutscenes, but quests, whether kizuna quests dealing with character story lines, or normal quests dealing with a variety of other things, or story quests dealing with the main plot. Add on to that the 'simple quests', which are the simple ones, but the quest centric structure allows you to advance the plot or focus on sidequests at your leisure, while still having the entirety of the world available to explore.