In general, the set $\mathrm{Hom}(\pi_1(C),G)/G$ (where $G$ acts by conjugation) naturally parameterizes $G$-local systems.

For example, if $G=GL_n(\mathbb C)$, these are just ordinary local systems of vector spaces: a map from $\pi_1(C)$ to $GL_n(\mathbb C)$ describes the monodromy around loops in $C$, and conjugate maps correspond to isomorphic local systems. If $G=U(n)$, the character variety naturally parametrizes unitary local systems (i.e. the fibres have an inner product such that the monodromy is unitary).

As Mike comments, there are various theorems generally known as non-abelian Hodge theory which relate these topological objects to holomorphic objects. For example, on a closed curve, the Narashimhan-Seshadhri theorem gives a bijection between isomorphism classes of unitary local systems and degree 0 holomorphic vector bundles (with some stability condition).

Similarly, there is a bijection between (iso classes of) all local systems and degree 0 Higgs bundles (with stability conditions).

These can be thought of as giving diffeomorphisms between the character variety and the moduli spaces which naturally parameterize these objects (note that for $G=GL_n(\mathbb C)$, the character variety has it's own complex structure, which does not pull back to the natural complex structure on the moduli of Higgs bundles under these diffeomorphisms).

There are similar results when the curve $C$ is not compact (i.e. has punctures) you have to be a bit more careful, and you may want to include extra data like a filtration of the bundle at the punctures, and constrain the monodromy around the punctures to lie in a particular conjugacy class.

I think this is discussed in the appendix to Wells' *Differential Analysis on Complex Manifolds* (written by Oscar Garcia-Prada), as well as in the papers of Narashimhan-Seshadhri, Hitchin, Donaldson, Corlette, Simpson etc...