1.The dictionary definition is happy. However, this is archaic and few people use it any more except in the phrase gay old time.
2. Homosexual, especially homosexual males but can be used for lesbians as well.
3.A generic insult. It can mean bad, stupid, whatever you want it to mean.
My Opinion:
Don't say that something is gay as an insult. I find this highly immature, mostly because it is often used when people can't think of a proper insult even when there is nothing homosexual about whatever they're insulting.
1.Jeremy was in a gay mood after getting an A on his test.
2.The people in The Village People are gay.
3."That is such a gay shirt,"remarked Robby.
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