1.The dictionary definition is happy. However, this is archaic and few
people use it any more except in the phrase gay old time.
2.Homosexual, especially homosexual males but can be used for lesbians as well.
3.A generic insult. It can mean bad,
stupid, whatever you want it to mean.
My Opinion:
Don't say that something is gay as an insult. I find this highly immature, mostly because it is often used when
people can't think of a proper insult even when there is nothing homosexual about whatever they're insulting.