Keen uses Dorrit Cohn's book Transparent Minds for her discussion of this. I've already mentioned this before, and since this is a key point, I will inevitably come back to this in the future from another angle. For now, let me repeat again the three ways Cohn sees narrators employing (and this discussion applies to third-person narrators, both authorial or figural) to describe the interior world of their characters: 1) psycho-narration; 2) narrated monologue; 3) quoted monologue. I have already briefly discussed quoted monologue in a reference to Clarice Lispector's story "The Imitation of the Rose," so now I'll pause on psycho-narration. The thing about quoted monologue is that I don't really think it's very much in vogue at the moment -- reading stories for Narrative Magazine, I'm by far more likely to encounter a first-person story than a third-person story that uses quoted monologue.
Psycho-narration basically describes those instances when a narrator tells us what a character thinks or feels. A narrator can tell us what a character thinks of feels at any given moment or over a long period of time, in general; these thoughts and feelings can be acknowledged by the character on the conscious level or not, the narrator has access into the character's subconscious psyche. Keen also reminds us that psycho-narration is very effective at representing what a character has not thought or felt. The example she gives: "She forgot to call the allergist for the third day in a row" (60).
Psycho-narration preserves the narrator's voice, the narrator's access to the usage of metaphors and other figural language; it certainly preserves the tense of the narration and the third-person perspective.
Almost any story I read today uses some form of psycho-narration. Here's an example from the magazine I'm reading at the gym this week, "Black Clock," No.11, short story by Susan Straight called "Alfonso":
A rat ran across the phone wire above his head just when he stepped behind the dumpster at the back doorway of Los Tres Chochinitos. He ducked, but the rat leapt into the branches of the tree across the alley, and he could smell the rotting fruit on the ground. Nectarines. It was August. Damn -- the rat was leaving Los Tres for dessert.
I love this example, because it's got both, psycho-narration and quoted monologue. This phrase "he could smell the rotting fruit" is psycho-narration because it gives us access to Alfonso's sense of smell in the voice and tense of the narrator. And the last sentence of this passage, "Damn -- the rat was leaving Los Tres for dessert," is a very good example of quoted monologue -- the word "damn" indicates Alfonso's thinking in the first person, and the entire line is something that Alfonso might actually say. The part of the sentence after the dash is in the past tense -- so I think technically this is narrated monologue (I save the discussion of narrated monologue for next time), but the word "Damn" set off between a period and a dash -- this one word, I believe, qualifies as quoted monologue.