The definition is simple. It applies to a person that looks both male and female, in other words u cant tell which they are. It most commonly occurs when someone is wearing clothing that would be suitable for both males and females, but it is not restricted to this.
Troy went out to collect his mail from the post box, only to have something out of the ordinary happen. A person of unknown gender strolled past, whistling a happy tune. Troy stood dumb-founded. This is an example of gender ambiguity.