A director answers that question in this 2014 article. Excerpt:
First, for me, an actor is good if he makes me believe he's actually going through whatever his character is going through. I'm talking somewhat about physical stuff (“He really is getting shot!” “He really is jumping off a moving train!”) but mostly about psychological stuff (“He really is scared!” “He really is in love!”). If an actor seems to be faking it, he's not doing his job.I agree that Keanu Reeves is a bad actor. Not just bad, but cringe-inducing. There’s a lot more to acting than line reading, but good line readings are necessary, and he just doesn’t know how to say a line convincingly. He seems more focused on producing a vocal timbre that’s pleasing to the ear, than on saying the line how a real person in the character’s situation would actually say it. By contrast, Steve Buscemi is a much better actor even though he seems unconcerned with whether his voice is enjoyable to listen to.
Second, the actor has to surprise me. This is the most nebulous requirement, but it's important. Except for really small parts that aren't supposed to call attention to themselves (e.g., a bank teller who just cashes the hero's checks), it's not enough for actors to just seem real. Seeming real is a requirement, but a second requirement is that I can't predict their every reaction before they have them. Think of how someone might react if his or her significant other ends the relationship. There are many, many truthful ways—ways that would seem like a human being reacting and not like a space alien behaving in some bizarre, unbelievable way. An actor's job is to know the breadth of human possibility and the depths of his or her own possibilities. He or she must pull from this well and surprise us. Otherwise, the actor becomes boring and predictable. . . .
I don't hate Tom Cruise the way some people do. To me, he's believable most of the time. He's just not very interesting. He rarely surprises me, and he doesn't seem to dig deep into a anything [sic] raw or vulnerable inside him. He seems guarded. The must vulnerable I've seen him is in Eyes Wide Shut, in which he did some good work. But it wasn't brilliant, and it's not his norm.
Keep in mind that many people . . . aren't very clear on what an actor contributes to a film. It's not necessary for most audiences members to understand who does what during production. Lots of people think an actor is great if they like his or her character. But that's often a function of good writing more that good acting. Or they think she's good if she pulls off some impressive effect, such as gaining or losing a lot of weight or pretending to be handicapped. Those are impressive stunts, but they aren't the core of what actors do. . . .
Some people think acting is good if they like the movie. Keanu Reeves, in my mind, is a horrible actor—mostly because he's wooden and fake. It often seems as if he's reading from cue cards rather than saying words that are his. There is a difference between playing an undemonstrative person and being a wooden actor. In fact, playing someone who is reserved is very difficult (because you have to act without showing very much), and the actors who pull it off are brilliant. I would point you to Anthony Hopkins in Remains of the Day, Tommy Lee Jones in many of his roles, and even Clint Eastwood in Dirty Harry. These actors manage to convey the sense that although they have stony exteriors there's much going on underneath.
To me, Reeves conveys an actor who is showing up and saying his lines. Having auditioned many actors, I'm used to hearing ones that can take any writer's lines and make it sound like their own words. And I'm also used to less experienced (or less gifted) ones who sound uncomfortable with words that aren't their own. They sounds as if they're are reciting or reading something. They sounds scripted. Listen to Reeves in this clip, especially at around 10 seconds in, when he says, “I have offended you with my ignorance, Count.” Many of his line-readings sound like that to me: He has not fully lifted them off the page and into his own mind and body. I don't believe much else is going on underneath except maybe nervousness. I don't know if you can see a difference between Reeves, above, and Tommy Lee Jones here. They are both pretty deadpan. The difference, for me, is that Jones seems to be speaking his own words, even though they are just as scripted as the ones Reeves speaks. Jones is just much more comfortable in his skin and much more able to “own” his lines.
Using the factors listed by this director, I value an actor’s being realistic more than being surprising, whereas the author seems to weight them about equally. For instance, he seems to think Tom Cruise is not terrible but not that great because he’s realistic but not very surprising or deep. But I think Cruise is a great actor who does have a lot of depth, and it’s OK with me if he’s not that surprising.
If most actors are regularly trying to be surprising, I’ll be surprised by the actor who focuses only on realism and not on being surprising.
As another example, the author seems to like Dustin Hoffman, but I think he’s an unbelievable actor, which is the worst thing I could say about an actor: I can’t believe him. When I’m watching him, I feel that I’m observing an actor making decisions about how to act. And I think that might be why some people think he’s a good actor — because they’re impressed with all the acting they’re seeing!
A good actor should create the illusion that you aren’t seeing any acting. I suspect that some of the best actors are severely underappreciated by audiences because they’ve done that job so well.