Traits....like smart, funny creative, dishonest and introverted...end up playing a big role in our mental representations of one another.
Chances are good that if I asked you to tell me about your spouse, your boss, or anyone else you know well, you would start rattling off a list of trait terms, rather than talking about their goals, beliefs, hobbies, or the groups to which they belong.
People don't really have traits--if what you mean by trait is that people have stable and predictable tendencies to behave in certain ways all the time.
Take someone who is extroverted. He or she may be more gregarious and talkative than others, but probably only in certain situations. For instance, s/he may be extroverted (or clever, funny, warm, or engaging) with their friends, but less so with work colleagues or strangers.
Also, a person's "typical" behavior will change as a function of where he or she is, whom the person is with, and what he or she is trying to do. This, of course, is one of the reasons it's relatively easy for two people to have very different impressions of you, depending on the situations they see you in.
Unfortunately, we tend not to take context into account when observing someone's behavior. The situational forces that affect--and sometimes completely control--someone's behavior may not be considered.
For example, when in power, people focus more on the potential payoffs of their risky behavior and much less (if at all) on the possible dangers. This may come as no surprise, but powerful people are more likely to act like selfish jerks. For example, the highest-status cars cut off other drivers (by going before it was their turn) 30% of the time, compared with only 7% for the lowest-status cars.
Source: Heidi Grant Halvorson: No One Understands You and What to Do About It