One kind of character you will come across is not necessarily put there by the developers to be particularly good or bad to play. Sometimes, they’re just there to be interesting. Maybe funny. They may be a complete joke. They may be cool and good-looking, or precisely the opposite. Regardless, they flesh out the cast; not everyone can be the best in every dimension, but anyone can be the best in someone else’s heart.
In fighting games, flavor characters come in all sorts of forms, having any sort of appearance, capabilities, moves, personality, and so on. You may see non-human monsters and animals as well, as well as hilarious or totally ugly people, all of which can still make an impact. But pretty boys like Balrog and Benimaru count, too.
Usually, characters will fall into this category despite not necessarily being great in any aspect of usefulness. They may stick around because they are popular among players, or even non-players. Dan of Street Fighter is one good example; he is a low-tier joke character, and is almost always the worst to choose if you want to win, but he is very popular because his core concept (a highly overconfident parody of SNK games and characters) is very funny.
Other flavor characters showcase what their game systems are capable of; in early 3D games, strange, tricky martial arts like Zuì Quán would be featured to make the 3D aspect of the games look like a cool challenge. The Dead or Alive series is infamous for its graphical fanservice. In recent “3D” games, characters like Bob (from Tekken 6) and Rufus (from Street Fighter IV) are obese, and in the latter case, very jiggly.
Developers are always under pressure to impress the audience, lest they not earn their keep. Other than the love of the game, this is the primary motivation for including flavorful characters and techniques.