Adjective. Used mostly when describing an article of clothing that is both hideous and a must-have simultaneously. Could also be used to describe an animal.
"That chihuahua is sooo cugley"
"That purple sweater vest that grandma gave me for Christmas...it's kind of cugely."
Courtney: "This shirt is hideous...and I sort of think it's cute."
Katie: "It's cugely."