The unit has switched sides. The switch will become permanent at the end of the battle.

Description (The War of the Lions)

Traitor, also known as Invitation in the PS version, is a status effect in Final Fantasy Tactics. A Traitor leaves their party and joins the opposing party. When afflicted, the target's portrait will either display Guest if the target joins the player's party, or Enemy if they defect to the enemy's side. Guest targets can be recruited into the party permanently. The AI will never try to invite the player's units, even under Confusion, and even if Invite is the only option possible. Any number of units may be Invited during a battle.

The easiest way to achieve this status is with the Orator's Entice or Tame. Other ways involve getting Dragons and Hydras into the party using the Dragonkin's Dragon's Charm.