They call it "Arse" only in the character traits file, this being the generic name for the trait. In-game you'll see one of the following names for each level : uninhibited, shameful, too well groomed, shameless queen.
And yes, it refers to the character being gay, take this for example :
"Too Well Groomed : Just one step too pretty and polished for his sexual preference to escape a discerning eye." (in game trait description)
It might seem politically incorrect for the XXI century, but the game just presents the medieval mindset concerning this matters.
(please no jokes about "Arse Moriendi", I only became aware of the potential misreading of this name after I chose it for registering on this forum - English is not my native language)
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