When something is so gay as to totally redefine one's perception on life, society and the universe. When something is Mad Gay, it is so far beyond gay that it necessitates a new definition - this is mad gay.
Person #1. "Hey dude I was going through your cd collection the other day.."
Person #2. "Oh?"
Person #1. "Yeah. I found your secret stash. You know. The Britany. The Christina. The Aqua."
Person #2. "Oh..."
Person #3. "That's Mad Gay."