Basically is a "rule" people use to avoid the overuse of top tier characters and give other characters a try.
They give characters a point or ratio number, with the better characters having the highest numbers, the Max points are 5 (this depends on the place i think), so you need to choose your character and looking at his/her point so you don't exceed the 5 points limit.
From MMCafe
Max points = 5
Ratio / Character
5 K', Raiden
4 Kyo, Elisabeth, Takuma
3 Andy, Iori, Shen, Kula
2 Robert, Chin, Yuri, Maxima, Leona, Ash, Benimaru, Kim
1 Duolon, Goro, Terry, Clark, Hwa, King
0 Joe, Kensou, Athena, Ralf, Ryo, Mai, Mature, Vice
In your sig you have:
Shen , Leona, Ralf:
That's 3+2+0= 5. So thats ok and "allowed"
Benimaru, Clark, Joe:
2+1+0= 3. Also fine.
Kyo, DuoLon, Iori:
4+1+3= 8 .Here you exceeded the limit of 5 points.
Andy, Kensou, Terry:
3+0+1= 4 . No problem with this.
What happens if you exceed the 5 max points, i don't know, you need to ask the guys at Arcade Infinity that post here.
Keep in mind this ratio system can change in the future.