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This is a neologism by Ciro Santilli, it refers to the fact that Zatoichi was not fully blind, but extremely hard of sight, which makes him:
  • too capable for the blind people, who did not trust him
  • too incapable for non-blind people, who despised him
and metaphorically refers to similar situations where a person or group of people are in the middle of two groups and not part of either of them.
A related thing that comes to mind is Aum Shinrikyo's Prophet Shoko Asahara, who was semi blind, and would bully the fully blind people of his school for blind people.