The adjective misunderstood is used to describe someone or something that is not correctly or fully grasped by others. A joke that is misunderstood will likely fall flat, as the audience just doesn't get it.
In the most basic sense, the word misunderstood is the past participle of misunderstand. Misunderstood homework instructions will likely result in the students turning in the wrong work. The word misunderstood is more commonly used to describe people who are, or feel, unappreciated because others don't see their true feelings, motives, or brilliance: Think of a misunderstood genius, like Galileo, whose ideas were not appreciated in his own time, or a misunderstood character in a story, whose "good" reasons for doing bad things are not known to the other characters.