This is going to get explained in more detail in the open post, but there is this thing in the Matrix called "the white room" where you are essentially uploading your avatar, and characters will have the ability to do "character creation" if they choose and make a human form. Or they can just go in looking like themselves, but that's probably not the best idea.

The default upload is them looking like whatever their "self image" is, which in the movie more or less means them but in a cool trenchcoat. In game, it's basically how they look IRL. Also, they can summon up pretty much whatever physical items they want while in the white room, too, since it's all just code.