I love to write but I have the hardest time coming up with names of characters and locations. It's especially hard since I'm a fantasy writer so I dont want to choose common names, but something that sounds more unique. How do you think up names?

Haven't used them, but I've heard about "fantasy name generators".  They might prove useful -- at the very least, you can use them to brainstorm some names of your own.  Here are a few links to some that were recommended by some gamers I know:

http://www.seventhsanctum.com/index-name.php

http://www.thewingless.com/forge/

http://dicelog.com/yafnagen

http://mystic-nights.com/mystical/Name-Generators/index.html

http://www.rinkworks.com/namegen/

God, I love rinkworks. A blast from internet days past.

I'm not great at names either, so I tend to go really ordinary (Lucy, Simone, Magda, Winnie, Martha)..  Although I did write a story in 7th grade in which the villainess was named Tyalin after the similar sounding enzyme in saliva.

Pay attention to your typos.  I've found some rather intriguing name possibilitieis that way...

You can also play around with alternate phoenetic spellings of words.  For example, an "f" can be "ph".  An "i" can be "y".  An "sh" (and this is a stretch) can be "ti" (such as in the suffix "-tion" is pronounced "-shun").  Therefore the word fish = phyti.

I like to take already-existing names and tweak them.

Baby name books are a good source, since they list origins and meanings as well as names.  Some editions come out every year, so you can find newer, trendier, and even foreign names listed.

I have the same problem, and I also write mostly fantasy.

What I usually do is find an obscure language (for instance, in one of my current stories I'm using Basque) as a guideline. I borrow a dictionary from the library, think of the character or place's salient characteristics, and look up those words in the obscure language. When I then find a word with a similar meaning that sounds right in my head and doesn't look too odd on the page, I tweak the spelling a bit (so I'm not locked into the language actually BEING Basque or whatever) and use it.

And then, when I'm stumped for plot points, I'll take the culture that speaks whatever random language I've chosen and research their mythology for inspiration. . . granted this often leads to me altering my story a bit, but it's always richer as a result. I learn a lot, and I feel it gives my world a bit more of a cohesive feel. . . for instance, sounds repeat the way they do naturally in languages (in Basque there are a lot of "g"s and "z"s); language is influenced by and influences in turn the stories that people tell around the fireside, and if by some chance one of my readers knows a bit about that part of the world, I hope that they find my borrowing interesting. :)

I will admit, for my generic European or American settings I tend to also use plain names; they are, after all, easy for people to remember and read and that way I just have to find one that sounds right. In that case baby name books can be very useful; just keep in mind that the meanings they cite are a little suspect -- there's this whole culture around baby names and what they mean that doesn't actually have any relationship to the field of linguistics.

I've used the phone book--last name for a first name.  The odd names in the city phone books are a trip.  There are websites for names in other languages.  I don't have a link, but I did find one at one time that allowed you to check names in many languages by chosing a flag (for a country).

I'm trying to be a screenwriter rather than a novelist.  My first screenplay is in science fiction so I can relate to your problem of finding "fantastical" names and in my case it's for the alien planet and alien species that I have created.

As to character names, I like to plan around the personalities, though I insist that at least one character should bear my initials.

Try not to get fixated with the names if you're still in the early stages of your manuscript.  Use temporary "placeholder" names.  When you're finished with the manuscript, you will have a better insight of what names work.