In my experience most people lovingly refer to their cats in negative-sounding ways. One of the terms of endearment we used for our most recent cat was "stinky little piss baby". I think most cat owners are well aware that they're unsanitary creatures.
If your housecat stinks, it's likely unhealthy or you're not providing it with a clean litterbox or you have insufficient litterboxes for the number of cats you have.
I suppose they're unsanitary in the same way all animals that aren't humans are: They don't was their hands? Cats don't strike me a particularly dirty creatures. They're not exactly clean and well groomed from nature, but no animal really is.