Direct characterization means describing character by using adjectives.
For example: He is an unusually honest man.
Indirect characterization is describing people through their actions, speech, appearance, etc...
An indirect equivalent to the pervious description could be for example:
When he found a wallet on the street, he returned it immediately to the nearby police station.
In the above text no adjectives were used but from the situation described, we can assume that he’s an honest man.