The book got started when a writer at the Clarion 1992 workshop voiced an opinion that you shouldn't even try to write characters outside your own ethnic background, because you'd probably get it wrong and offend people. Better stick to your own experiences.
I do get this, because as a white straight woman I have these fears too. I don't actually know any POC, how could I understand their experience well enough to write from their point of view? And even if I did all the research I could and talked to people (Scary, because I'm still a shy, socially awkward person who doesn't make friends easily), would I be stepping on toes writing about issues that don't affect me directly? And from a place of white privilege, no less? Would it be better to leave these issues to the people who have actually experienced them and celebrate books by POC writing about their own experience? And it's not just about ethnicity. The same thing applies to writing characters whose sexual orientation or religion differs from your own and writing about disabled characters when you yourself are able-bodied. Shouldn't you just write what you know? That's like the first thing they teach you in every writing book.
I grew up in a predominately white neighbourhood. In Finland there weren't any people of colour in my class or even in the whole school that I remember. For the two years we lived in California there were, but I was just eight at the time, so I don't remember that much about my time there. I was in the ESL (English as a second language) class most of that time, because I didn't speak any English when we moved to the States. As a shy person I didn't make many friends and I didn't keep in touch with anybody after we moved back to Finland. I do know some people online through my writing workshop, but that's pretty much it.
On the other hand, isn't writing characters different from you the whole point of writing in the first place? Understanding someone else's experience? In speculative fiction you can cheat a bit by writing about aliens or fantastical creatures, but I do think it's kind of limited to just write about straight white people all the time. Shawl and Ward also take this view and encourage writers to step out of their comfort zone.
The book discusses ROAARS (Race/Orientation/Ability/Age/Religion/Sex) traits and how they affect characterisation. There's also a chapter on writer hang-ups about writing outside their experience, talking about fear of the other and the liberal dread of the racist label, which can lead to ignoring any differences you notice between different groups out of political correctness and fear.
There's also a chapter about things you shouldn't do, like avoiding stereotypes, making the POC/LBGTQ/disabled character a sidekick without any goals of his/her own, portraying them as victims all the time, and using a disrespectful dialect, for example. Best of all, there are exercises, specific references, and reading lists to help you along.
The Writing the Other website is full of useful stuff, too. You can sign up for the masterclasses (Definitely will do one of those at some point. I just have to figure out the time difference etc.), peruse the material available for free on the site, watch videos, and there's also info on how you can get in touch with sensitivity readers, really useful for connecting with people for scaredy cats like me. They emphasise that a sensitivity reader should get paid, which is reasonable, of course.
writeinthemargins.org has a database of sensitive readers, for example.
A very useful book that every writer should read.