The word “guy” for a homemade effigy comes from the name Guy Fawkes.
After Fawkes became associated with the failed Gunpowder Plot, people began making figures representing him for 5 November celebrations. These figures were often dressed in old clothes and displayed or burned on bonfires. The noun “guy” gradually developed from the name of the historical person into a term for a bizarrely dressed person.
By the 19th century, the word had broadened further in British English to mean a man or person, often informally. In North American English, “guy” became a common informal word for a person, regardless of clothing or appearance.
The modern word therefore has a direct connection to Bonfire Night tradition, even when speakers use it without thinking about the festival. A “Guy” in a 5 November celebration is an effigy, while lowercase “guy” usually means a person.