Short for 'defective', which means 'the Ultimate',
superlative, better than good...
This started some time after Michael Jackson's "I'm Bad" video, in which 'bad', of course, meant 'good'.
So, to denote a meaning that means the ultimate
superlative of 'good', people started using 'defective', which of course is the ultimate
superlative of 'bad', and which then was simply abbreviated to 'def'.