That happens when you try to make a character with some of the new hairstyles. Just use one of the normal hairstyles and you should be able to make a char.
That's called the "Illusion" status alignment. Certain monsters, such as bapho jr's can cast it over you. I know it makes most of RO players to lag the crap down due to the hard work it is to make the image go wavy.
If you can't avoid fighting bapho jr's. Just type /effect. It'll make the wavy screen go away.