The term "Friendly" refers to players who have no hostile intentions towards you, as opposed to Bandits who only want to kill you
Some friendlies can even be Heroes if they help other players by supplying them with gear and saving them from Bandits and Zombies
Tip
Press Q and E repeatedly to perform the Friendly Dance, wiggling from side to side, which is considered a sign that you are friendly
Saying you are friendly is a death sentence and is not recommended.