The dictionary definition is happy, but it has come to mean homosexual, and often is used as a general negative word to mean stupid, dumb, useless, boring, mean, or anything negative.
Some people say that people who use the word "gay" as something negative are ignorant, or homophobic, however the word is so commonly used that many smart, non homophobic people use the word.
Example 1: I'm having a gay old time!
Example 2: Those two guys making out are gay.
Example 3: Dude, skinny jeans are so gay.