Though, for the sake of simplicity, human-shaped elements can also be referred to as ‘characters’ despite that being imprecise.

Characters are also an expression of setup/payoff, though I’ll admit that I didn’t realize this at first.
Basically, ‘agency’ means that the character is capable of making choices within a story. This is to differentiate them from other elements which are mostly static unless acted upon (by characters).
Where does the setup/payoff come in? Well, a character is the setup and their agency is the payoff to that agency. Though this is the super abstract layer and mostly irrelevant to storytelling unless you want to be super pedantic.