Learn Russian: В этом романе много героев.

The dictionary form is герой (hero/character), which is a masculine noun ending in -й. When forming the genitive plural for masculine nouns ending in -й, we drop the -й and add -ев. If the noun ended in a standard hard consonant instead, like роман, it would take -ов.

Why is героев in the genitive case here?

It comes directly after the word много (many). Words that express a quantity, like много, мало (few), and несколько (several), require the noun that follows to be in the genitive case. Since there are many of them, it takes the plural form.

Why do we say в этом романе and not just в этот роман?

We are talking about a static location (happening inside this novel), which requires the prepositional case. The masculine word этот (this) changes to этом, and роман takes the standard prepositional ending -е.

Does герой just mean 'hero', or does it also mean 'character'?

It means both! In the context of books, movies, or plays, герой is the standard Russian word for a character (especially a main character), even if they aren't particularly heroic. You will also sometimes see the word персонаж used for character.