"Mat Salleh" is a colloquial term for westerners in Malaysia.
I believe that the term comes from one of the first westerners to convert to Islam in Malaysia, whom took the name Mohammed Salleh ("Mat" is a contraction of "Mohammed").
The term is used in friendly manner and should not be taken as an insult. "Orang Putih" is the other term used, which literally means "White Person" in Malay.
There is also a historical Mat Salleh, who was a freedom fighter against the British in Sabah (part of Borneo). He was not a westerner, though.