Caballero literally translates to "gentleman" or "knight". It's a classic Spanish word that evokes a sense of honor and chivalry.
In this song, Alejandro Fernández repeatedly uses "caballero" to highlight the internal conflict of the narrator. He's deeply attracted to a woman who is with another man, and while his desires tempt him to "steal" her away, his sense of being a "caballero" prevents him from disrespecting her or her partner. This contrast between desire and duty makes the word central to the song's narrative.
Have you ever been so attracted to someone that you can't stop thinking about them, even if they're with somebody else? That's the intense feeling Alejandro Fernández sings about in "Caballero." He sees a woman who immediately captivates him, but there's a catch: she's holding hands with another man, someone the singer knows.
This song is all about the singer's internal battle between his powerful feelings and his principles. He calls himself a caballero, or a gentleman, and because of this, he feels he must be respectful. However, he shares a secret fantasy with her, imagining what he would do if he weren't a gentleman. He sings that he would: