If you take a close look at the front and back of the 3D model, you should see that the checker texture is reasonably flat and accurate due to the planar mapping. However, looking at the sides or top or bottom of the 3D model, we can see the texture stretching, which is what we need to fix.
Step 2: Use the minimum number of seams
We need to figure out how to unwrap the surface of the 3D model so we can lay it down flat like a piece of cloth. Ideally we would like to unwrap it in one piece but that isn't possible so we need to figure out the minimum number of surfaces we can divide it into to be able to lay it out flat. This means we will need to define the location (on the 3D surface) where to make cut lines for each section. The problem that occurs when we define a cut line (also called a seam) is that the texture we draw can often be difficult to match on either side of the seam, so the seam will appear like a line on the surface where it should actually be smooth and continuous. This is the reason why we aim to use as few seams as possible.
We can't avoid using seams, so our tactic is to put them in places that are less visible, like the inside of the arms and legs. The seam line for the face is positioned around the outside rather than a vertical line between the eyes and down the nose for the same reason. For a box, you can put the seam line on an edge to hide the seam quite well, but human anatomy is mostly rounded in shape.
When defining the seams, it is easier to see where to put them by turning off the texture on the 3D model by selecting Shading > Hardware Texturing if you currently have it turned on. To create a cut (or seam line), first change to "edge select" mode (F10 key) and select a line of edges by holding down Shift and clicking on the edges. Make sure you have selected the Modeling menu set, then select Polygon UVs > Cut UVs. To reverse this action in case you make a mistake, you can join the seam back together by selecting Polygon UVs > Sew UVs.
To be able to see where the seam lines are more easily, select Display > Custom Polygon Display > (small box to the right to show options). Select the Texture Borders option then Apply and Close. You should now be able to see the seams as thicker lines.
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