This is a great phrase. When you call someone 'a character' it means that they are unique in some way.
The phrase can be positive or negative, and this is usually decided by how you say the sentence.
Here are JUST A FEW OF MANY possible examples of this phrase used positively: Maybe someone is very funny in a way that is different to other people, maybe someone is extremely extroverted compared to others, maybe someone loves parties and is always the leader of the group, maybe someone dresses very extravagantly and has some interesting hobbies. These are just some examples, the phrase has a very broad meaning when someone says it, the other person usually asks in what way this person is such a character.
When it is used negatively, the strength of how negative it is again depends on how you say the sentence. Here are some examples of the phrase used negatively: maybe you could be referring to a particularly naughty child in your class at school, or maybe the person is too loud and makes you feel uncomfortable, maybe the person can act a little bit strange sometimes.
Hope this helps, like I say the phrase is used very broadly!