The word is usually used to refer to lesbians as opposed to gay males.
It is mostly used as a term of endearment among lesbians, and directed toward one another in a joking, non-threatening manner.
Woman #1: "Hey guys, check out my new Subaru-- it came with a sweet kayak rack! Now I'm going to rugby practice."
Woman #2: "God, you're such a faglet."
Woman #1: "Look, there's my Women's Studies teacher walking down the street."
Woman#2: "Is she a faglet?"
Woman#1: "Uh yeah! Look at her Birkenstocks and mullet, dude."
"Yeah he's such a faglet!"
"Don't wanna go to a faglet wedding."
"He likes baking mini-cupcakes with pink icing and little chocolate hearts?! GET AWAY FROM THAT MOTHERFUCKING FAGLET!"