Daniel Steadman is kind of like Troy Bolton from High School Musical—he's popular and sexy, not to mention the school's star thespian. He's also our protagonist's crush, which makes him pretty important. Still, there's no way someone like that would be interested in Lily… is there?
In reality, Daniel is a perfectly illustration of the way Lily tends to underestimate not only herself, but others (more on this over in Lily's analysis elsewhere in this section, Shmoopers). When Daniel doesn't show up at play practice and disappears from school, Lily assumes it's because he "he'd noticed she had this stupid crush on him" (27.12). Which, of course, makes no sense.
And since we actually get inside Daniel's head for a couple of chapters, we know this isn't true. For one thing, Daniel has chicken pox, which is a totally legitimate reason for missing school. And for another, Daniel actually likes Lily, too, even though he's not aware of it: "He didn't want to miss rehearsals […] it had something to do with a voice, a beautiful, beautiful voice" (28.44). So yeah—Lily assumes the worst about him, failing to consider a whole slew of more likely explanations for his sudden disappearance.
Of course, through the power of third person omniscient narration, we know that it's Lily's sweet voice he's in love with, so it's no surprise to us when Daniel finally meets Lily, does the math, and promptly asks her out. But Lily sees Daniel as too popular and self-interested to care about someone like her, jumping to conclusions as she's prone to do. Despite her judgments against Daniel and herself, though, Lily gets her fairy tale ending because Daniel does ask her out, without her having to change a thing for it to happen.
Daniel isn't a particularly developed character—in some ways, he shows us more about Lily than himself—but what we do know is that he's one decent, and super handsome, dude.