An insult referring to the almost piratical amounts of gayness being exhibited by a person. Also a nod to "Captain Ahab" from Herman Melville's Moby Dick, so one can appear homophobic and well read at the same time. Fantastic.
James the gayhead earned his name from having a series of gay looking haircuts, eventually people realised it was not his hair that made him look gay it was his head. He was forever known as gayhead.