The arrow dictates which divinity has divinity over another divinity. Having divinity (div for short) over another divinity mean you will do more damage to and take less damage from that divinity (and any divinity that has div over you will do increased damage to you and take less damage from you).
The Neutral divinity has no bonus or penalty to or from damage when in combat against any other divinity (including other neutral divinity characters). They also cannot use Embers. They can still benefit from blessed equipment from the other five player divinities (so deck your gear!).
There are also two other divinities not on this chart Holy and Evil. They are not available to players (at the time of this writing). I am also not sure how the Neutral divinity works in regards to them (anyone able to provide this info?).