Multiclass in Pillars of Eternity 2: Deadfire is a term used to define special selections that mix multiple Classes.
When playing as a Multiclass character there are obvious benefits over a Single Class character, but not everything is better. For example, you only gain access to each Ability Level of a Class for every 2 Levels in it. This means that you won't have access to higher level Abilities as quickly if you Multiclass, which might be the single biggest downside, since this may get you killed in tougher fights where you may need them.
Secondly, Multiclass characters cannot access Ability Level 8 or 9 of either Class they play because their Power Level only increases every 3 levels instead of ever 2, whereas a Single Class character does. This is the second biggest downside of a Multiclass character, because the best and most power Abilities are at the bottom of each Tree. Be sure to preview these Trees when making your character so you can see what you'll be missing out before confirming during Character Creation.