What it means:

helpful but perceived as hurtful

How Shakespeare used it:

"I must be cruel only to be kind; / Thus bad begins, and worse remains behind," says the tormented Hamlet. He has just mistakenly killed Polonius, and it's clear that he doesn't know how bad things are going to get. (Hamlet, Act 3, Scene 4)

Modern example:

"The government has portrayed the cull [of 400 kangaroos] as a necessary case of being cruel to be kind, but the international focus has been mostly on the cruelty." — Tim Johnston, New York Times, Mar. 14, 2008

Plus: The Nick Lowe song of that title from 1979.