"Chibi" is a Japanese slang term for a short person, although the word is generally associated in the west with smaller, large headed versions of anime characters. "Derf" is believed to be "Fred" spelled backwards. Fred was the most popular YouTube channel around the time Greg began using Chibi Derf in videos. The Fred character used an edited high pitched voice and talked fast, much like Greg's Chibi character.
Chibi wears a short blonde wig, a ruffled red shirt, and black pants. He is not a very bright character, usually getting himself into bad situations.
Chibi is mostly, if not only used in Greg's more comedy centered sketches. The character is mostly used by Greg when he is doing dangerous or gross out stunts.