definition (i) is more commonly seen in chatrooms; whereas definition (ii) seen in multiplayer games.
if someone uses mf towards you, it's best to pretend you dont understand, so they will explain - either (i) or (ii). Since you dont want to just start insulting them.
Example:
<Shinosuke> Blah.. lets stop the conversation.. I dont want to talk abt it anymore.
<Person1> ok mf.
<Shinosuke> mf?
<Person1> mf - my friend.
<Shinosuke> Oh.. ok.. i thought.. nvm.
Example:
* Shinosuke drinks his L&P.
<Person1> What L&P??
<Shinosuke> You dont know what L&P is?! It's world famous!!
<Person1> No? Never heard of it.
<Shinosuke> Haha! Of course! It's world famous in New Zealand!!
<Person1> . . .
* Person1 kicks Shinosuke in the nutz.
* Shinosuke dies.
Example:
<Shinosuke> It's "Pronunciation", not "PronOunciation"...
<Shinosuke> You stupid Father Mucker!
* Shinosuke grins and acts all smart and mighty.