A bastardization of you're gay, used primarily by 'net denizens of average or lower intellect and a poor grasp of the english language. May also be used in the literal sense, similar to the first-person usage "My gay", or third-person "His/her gay".
An pathetic insult used by people who can't think of anything better to say and are very bad at grammar and say "your" instead of "you're" when appropriate.
Bob: Hey dude what's happening?
Chris: Fuck off
Bob: What have I done?!
Chris: Your gay!
Bob: Shut the hell up you retarded fuckfaced pussy unclefucking douchebag turd burglar!!!
Chris: Um... your gay.