When David arrives at Salem House, on orders from Mr. Creakle, Mr. Mell immediately attaches a sign to David's back: "Take care of him. He bites." (By the way, in this case, "Take care of him" definitely does not mean, "Be nice to him." It means, "Be careful around him.") At the level of the plot, this sign is a petty revenge from Mr. Murdstone, whose hand David bites when Mr. Murdstone whips him. But symbolically, this sign demonstrates the intense isolation that David feels once he has been slowly squeezed out of his mother's life and, eventually, out of her home. He has been labeled a bad boy by Mr. Murdstone – unjustly, certainly – and he is powerless to challenge Mr. Murdstone's orders.
The sign is so humiliating to David that he lives in fear of when the other boys will arrive at school for the start of the new term: he doesn't want them to start mocking him or avoiding him for this sign that he is different. After all, every first day of school is awful – how much worse would it be to introduce yourself to a new school with a sign on your back saying you bite? The sign underlines David's embarrassment and shyness at his change of circumstances.
In yet another moment of foreshadowing, David finds a true friend in Traddles: Traddles is the first boy who sees the sign. And instead of teasing David or making his life a misery, Traddles treats the sign as a game. And David is hugely relieved. David also hears from Steerforth that his sign is, "a jolly shame" (6.30) – in other words, that the sign sucks – and so David is doubly comforted. After he has been accepted by his peers, the sign quietly disappears. Oh, there's a nasty reason for its vanishing, since Mr. Creakle takes the sign off so that he can beat David's back more easily. But symbolically, the sign goes away because David has made himself a place in the society of Salem House. He's no longer as isolated as he once was, with Traddles and Steerforth at his back.