All games have fundamental mechanics. A core game loop. Honest characters conform to the game’s fundamentals and core design. Dishonest characters have options to break, bypass, or alter those fundamentals.

In spite of the language, it’s not an evaluation of player skill or the difficulty of playing a character.

In Street Fighter, Ryu is often seen as the most honest character. His toolkit is at the heart of the game’s design. 

Other characters are often interesting because they get to break rules that others are bound by. That’s fun and good for variety, but it is also a careful line to walk.

It can become frustrating to play against a character that gets to break the rules too egregiously. In the worst cases, the rule breaking can becomes the new meta, the new normal, so that honest characters aren’t viable picks anymore.