You need to declare variables before you use them.

A quick fix of your code to get it compiling for you:

// Adventure Game

#include <iostream>
#include <string>

using namespace std;

int main ()
{
    std::string characterName;
    std::string characterRace;
    std::string characterClass;

    cout << "\tWelcome to The Generic Adventure Game!\n\n";
    cout << "Please create your character\n\n";

    // Character Customization
    cout << "Name: ";
    cin >> characterName;
    cout << "\n\n";

    cout << "Available races...\n";
    cout << "Dwarf, Human, Orc\n\n";
    cout << "Race: ";
    cin >> characterRace;
    cout << "\n\n";

    cout << "Available classes...\n";
    cout << "Paladin, Wizard, Warrior\n\n";
    cout << "Class: ";
    cin >> characterClass;
    cout << "\n\n";

    if (characterName.find(' ') != string::npos) {
        cout << "Name is invalid. One word names only.";
        return -1;
    }

    if (characterRace != "Dwarf" && characterRace != "Human" && characterRace != "Orc") {
        cout << "Race is invalid. Remember the races are Dwarf, Human and Orc.";
        return -1;
    }

    if (characterClass != "Paladin" && characterClass != "Wizard" && characterClass != "Warrior") {
        cout << "Class is invalid. Remember the classes are Paladin, Wizard and Warrior";
        return -1;
    }

    if (!characterName.empty() &&
        (characterRace == "Dwarf" ||
        characterRace == "Human" ||
        characterRace == "Orc") &&
        (characterClass == "Paladin" ||
        characterClass == "Wizard" ||
        characterClass == "Warrior"))
    {
        cout << "Lets play!";
    }

    return 0;
}

Keep your spirit high, and keep going! Learning is a fun process!

you should also post these questions in general/beginners or even game programming forums, this particular board isn't exactly for helping with problems.

Moving to For Beginners