Although originally a derogatory term for lesbians, it is now often used with pride by lesbians themselves, especially the younger and hipper lesbian crowd. Some lesbians (especially older or super-sensitive ones) still object to the term, but it is becoming increasingly common and mainsteam (at least within the gay community), with events such as "Dyke Nights" or "Dyke Marches" being held around the country. In fact some dykes resent being called a lesbian, as they feel it is much less cool than being called a dyke.
Note: Dyke with a "y" is a lesbian. Dike with an "i" is for damming water.
Example: Hey, Amanda, are you going to the Pride March this weekend?
Hell ya! And I am definitely not missing the Dyke March. Sarah and her girlfriend are riding in the Dykes on Bikes contigent.