This doesn't mean that all your characters must be trying to jump each other's bones.
On the Nose is a popular expression when discussing bad dialogue. It means that the character is saying verbatim what the writer is trying to express. That equals bland dialogue. Nobody talks like that, and your readers won't enjoy it. For dialogue to snap, crackle, and pop, there must always be subtext. What's going on beneath the words. If what the character is thinking and what they're saying is the same, then there is no subtext, no hidden layer for the reader to relish. In other words, you're in deep sh*t.
We don't talk like this in real life when we're gabbing with our friends and family. We say what's on our mind. The main time when we immediately switch to talking with subtext is when we flirt. Have you ever seen two people flirt? On the surface, they are having a regular conversation. But their body language is having a different discussion, and it's all about sex. What they are talking about has very little to do with their objective. That's something to strive for in your dialogue.
Which scene is more entertaining to read:
"You're very pretty and I want to kiss you," Guy says. He runs his fingers down Girl's arm.
"You're also cute and I want to make out right now," Girl says. She blushes and interlocks her fingers in his.
"I heard that it rains in Seattle ten months out of the year," Guy says. He runs his fingers down Girl's arm.
She blushes and interlocks her fingers in his. "Doesn't it ever snow there?"
"I guess not."
"So no white Christmas for them."
"Sad but true."
Both scenes accomplish the same thing and have the same description. But which was more entertaining to read? The first conversation had no subtext. Their words and body language were in sync. In the second scenario, their conversation has nothing to do with what's going on between them, and yet it works. If this were just smalltalk, it would put readers to sleep. But here, talking about the weather only increases the tension, making for an exciting read.
Not all scenes you write will be as exciting as a kiss scene, but that's not an excuse to write bland dialogue. If the scene is about what the scene is about, then you're in deep sh*t. Jot down what your characters' objectives and feelings are in the scene and write their dialogue as far from that as you can. Remember, we are creatures of contradiction. We push people away when we need them the most. We are cordial to people we loathe, and rude to the ones we love. Our friends' happiness can make us miserable. That's what makes us interesting.