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A gag character is usually a character that is rarely used, and shows no personality except for the joke in comic strips and TV shows. Often, a gag character's usage is for only one joke.
How a gag character works
Gag characters usually appear in single panel cartoons that do not follow any main character (although they might follow similar types of jokes). Some examples include The Far Side, Bizarro, and Speed Bump. Because of this, gag characters have little to no personality, considering their short lives.
Gag characters also appear on television. However, a gag character on a show usually appears for only one episode. Any subsequent appearances make the character into a secondary character. Occasionally, gags on television are not dubbed "gags". They are more likely to be called stock characters.
A "gag" character in a movie is often an extra.