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This essentially happens every time a wrestler makes a Face-Heel Turn or a Heel-Face Turn. This can sometimes be ridiculous, as you'll end up with many instances of a cold-blooded villain injuring as many people as he can, and then suddenly start running out to help good guys. However, it's been a trope of wrestling for so long, that most wrestling fans just kind of accept it.
Mick Foley publicly stated that he was proud of the way that his character Mankind had started off very dark and ended up essentially a children's character who wore a sock puppet named Mr. Socko and did things like come to the ring with balloons or with "Yurple the Clown".
In one particularly egregious case, WWE wrestler Muhammad Hassan started out as an Arab-American who was sick of being stereotyped as a terrorist; as time went on, he gradually became a stock Foreign Wrestling Heel who just happened to be from Detroit, in the process becoming everything he was originally trying to convince people he was not.
The unmasking of Luchadors, particularly when WCW did it, was character derailment. Juventud Guererra maybe got some decent mileage out of his unmasking. Rey Mysterio Jr, who without his mask looked about 10 years old, was put into a Mexican hip hop gimmick? Not so much. But at least he got a gimmick. Psicosis just lost his mask.
Although it should be noted that Psicosis losing his mask was not WCW's fault in this case, as he had already lost the mask to Rey Mysterio Sr. during a tour of Mexico prior to losing it in WCW. It was, however, WCW's fault when they promised him a Cruiserweight Title run for unmasking, then simply appointed him the champion after Lenny Lane got pulled off television, made him lose it immediately, and called it his reward. Seriously, what the Hell, WCW?
Victoria's initial WWE persona was of a Fun loving ex-ho that liked to dance but she then suddenly became psychotic villain who held a grudge against Trish Stratus. She claimed to hear voices in her head and when she lost the Women's title she continued to act as though she still had it, holding up an imaginary belt instead. She turned face at the end of 2003 and initially retained a few of her psycho characteristics but soon she became close to her original character albeit with a more absurd dance routine. After about a year she turned heel again but this persona was nowhere near as intense as her old one.
This seems to happen to a lot of female wrestlers for some reason; a Heel-Face Turn tends to result in the loss of any personality whatsoever, but Victoria (now Tara) is probably the best example. Continuing the derailment, she's now a generic face in TNA. The extent of her characterisation is to say, "I want to do my best," and "I came here to be the best," as many times as possible in a promo.
Maybe she's medicated.
How about what TNA did to Tomko? His character as a loyal straightman enforcer to Christian and AJ Styles was experiencing a subtle excellent growth from just another big man sidekick into his real-life personality of the "Man of Principles", to the point chanting his name became a meme in the Impact Zone. Fans were even thrown a bone on-screen when he stood up for Traci Brooks against her misogynistic employer, and then when he and AJ won the tag titles together by beating Team Pacman. During the time Kurt Angle pimped his wife Karen out, causing a break in the team, it looked like Tomko was ready to strike out on his own - especially after a Moment Of Awesome where he said "Tomko's for Tomko" and basically told Kurt he could take his offer to join his Angle Alliance group and shove it. The next few weeks consisted of Kurt and AJ, who had fully turned on Christian, trying to recruit Tomko, Kurt disrespecting Tomko's wife and pressing his Berserk Button in the process, meanwhile Christian is helping him out against Kurt (whose title Christian is gunning for) and telling Tomko that the whole world respects him for being his own man. Tomko appears to even have Christian's back at the end of the night…but then at the next pay-per-view he turns on him and joins Angle. Between AJ being overly distracted with Karen Angle to the chagrin of both Kurt and Tomko, and the eventual loss of the tag titles to somebody's alter ego, Tomko turns on Styles in a couple of months and becomes a Sociopathic Soldier for Kurt and against anyone he ever worked with or for in the past. Needless to say, all his momentum faded. He was later squashed by Matt Morgan, released of his own request, came back in a mystery attacker storyline which was cut short by Hulk Hogan and Eric Bischoff's arrival, became a jobber and got released again, and then…things got very ugly for Tomko.