Numerous reports suggest that learning gains in introductory university physics courses may be increased by "active-learning" instructional methods. These methods engender greater mental engagement and more extensive student-student and student-instructor interaction than does a typical lecture class. It is particularly challenging to transfer these methodologies to the large-enrollment lecture hall. We report on seven years of development and testing of a variant of Peer Instruction as pioneered by Mazur that aims at achieving virtually continuous instructor-student interaction through a "fully interactive" physics lecture. This method is most clearly distinguished by instructor-student dialogues that closely resemble one-on-one instruction. We present and analyze a detailed example of such classroom dialogues, and describe the format, procedures, and curricular materials required for creating the desired lecture-room environment. We also discuss a variety of assessment data that indicate strong gains in student learning, consistent with other researchers. We conclude that interactive-lecture methods in physics instruction are practical, effective, and amenable to widespread implementation.