When you press F9, you will see the red and green and white bars which represent your standings with NPCs. The one on the very bottom, if it is flashing, you are showing that faction's name before yours.
That is called an IFF. Identification Friend or Foe.
IFF combined with ID, Ship/equipment as well as Ingame Actions build your character's image in RP.
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IFF basically is your identification to other players, i.e having Zoner as iff means that your a Zoner. Your ID is your real identification; all players must have one.
It's annoying to see a Lib Dread with a Navy ID and Universal IFF, but it isn't sanctionable.
People -will- complain however, best to go for a matching one.