A "shady" person is someone who seems bad, dangerous, or dishonest. For example, if you are suspicious that someone sells drugs or cheats on his girlfriend, you can call him "shady". 

If you know that a person does bad things, don't use "shady". Only use it if you think they do bad stuff.

You can also say that a person "is acting shady":

What's up with you? You've been acting awfully shady lately.