1 "Gay" 1178, "full of joy or mirth," from O.Fr. gai "gay, merry," perhaps from Frank. *gahi (cf. O.H.G. wahi "pretty"). Meaning "brilliant, showy" is from c.1300. Slang for "homosexual" (adj.) is first recorded 1951, apparently shortened from gey cat "homosexual boy," attested in N. Erskine's 1933 dictionary of "Underworld & Prison Slang;" the term gey cat (gey is a Scot. variant of gay) was used as far back as 1893 in Amer.Eng. for "young hobo," one who is new on the road and usually in the company of an older tramp, with catamite connotations. But Josiah Flynt ["Tramping With Tramps," 1905] defines gay cat as, "An amateur tramp who works when his begging courage fails him" Gey cats were also said to be tramps who offered sexual services to women. The "Dictionary of American Slang" reports that gay (adj.) was used by homosexuals, among themselves, in this sense since at least 1920. Ayto ["20th Century Words"] calls attention to the ambiguous use of the word in the 1868 song "The Gay Young Clerk in the Dry Goods Store," by U.S. female impersonator Will S. Hays. The word gay in the 1890s had an overall tinge of promiscuity -- a gay house was a brothel. The suggestion of immorality in the word can be traced back to 1637. Gay as a noun meaning "a (usually male) homosexual" is attested from 1971. [da: http://www.etymonline.com/index.php?term=gay]
***
Gay, in addition to meaning "merry", "joyous" or "glad", also means homosexual. The word gay has had a sexual meaning since at least the nineteenth century (and possibly earlier) – in Victorian England, female and male prostitutes were called "gay" (because they dressed gaily). Eventually, "gay boys" (renters) became used as a term for any male homosexual. In the United States, the term may have arisen from the hobo community: a young hobo, a "gay cat" or "geycat", often had to befriend an older more experienced hobo for education and survival. Such a relationship was implicitly sexual, hence the term "gay cat" came to mean "a young homosexual". The most famous of these early "gays" was Thomas Collingwood, a portly, cherub-faced musician who had fallen on hard times after a prolonged period without work.
A quote from Gertrude Stein's Miss Furr & Mrs. Skeene(1922) is possibly the first traceable use of the word, although it is not altogether clear whether she uses the word to mean lesbianism, or happiness. "They were ... gay, they learned little things that are things in being gay, ... they were quite regularly gay".
Noel Coward's 1929 musical Bitter Sweet has the first uncontested use of the word: in the song Green Carnation, four overdressed, 1890s dandies sing: Pretty boys, witty boys, You may sneer
At our disintegration.
Haughty boys, naughty boys,
Dear, dear, dear!
Swooning with affectation...
And as we are the reason
For the "Nineties" being gay,
We all wear a green carnation.
Coward uses the 'gay nineties' as a double entendre. The song title alludes to the gay playwright Oscar Wilde, who famously wore a green carnation himself.
Gay can be used exclusively or inclusively. The exclusive meaning refers only to men who prefer sexual or romantic relationships with other men. The inclusive meaning refers to both men and women who prefer sexual or romantic relationships with their own sex (though there is some disagreement about this, hence the term "lesbians and gay men" – see homosexuality). Whether bisexuals are included in either of those meanings is a matter of debate (see bisexuality).
It has been claimed that "gay" was derived as an acronym for "Good As You", but this is a folk etymology. Another folk etymology accrues to Gay Street, in New York's West Village -- a nexus of homosexual culture. The term also seems, from documentary evidence, to have existed in New York as a code word in the 1940s, where the question, "Are you gay?" would denote more than it might have seemed to outsiders. The word "gay" is also used as slang to express derision or mockery. For example, "my computer is acting gay", or "that hat is so gay". The derogatory implication is that the object (or person) in question is inferior, weak, effeminate, or just stupid. This slang is very common among young people, who understand the term as meaning 'emotionally open to the point of being ridiculed,' as per Barney the Dinosaur -- but who commonly do not link the term to authentic homosexuality. It appears to float free of the accepted usage, possibly because homosexuality, sui generis, is still exotic and imaginary to much of mainstream America. It exists as a transgressive insult which many find offensive beyond the intention of those using it.
Another spelling, "ghey", is sometimes found on the Internet and is supposedly used either to insult without reference to homosexuality or to bypass chat room censors. See also: fag. According to the Safe Schools Coalition of Washington's Glossary for school employees: "Homosexual: Avoid this term; it is clinical, distancing and archaic. Sometimes appropriate in referring to behavior (although same-sex is the preferred adj.). When referring to people, as opposed to behavior, homosexual is considered derogatory and the terms gay and lesbian are preferred, at least in the Northwest." [da: http://en.wikipedia.org/wiki/Gay]

2 Wayne R. Dynes (ed.), 1990. Encyclopedia of Homosexuality, op. cit.
3 Eve Kosofski Sedgwick, 1992. Epistemology of the Closet.
4 From: "Massimo Consoli" To: [storiagay]; Sent: Sunday, March 26, 2006 1:18 PM; Subject: [storiagay] De Pisis e gli angeli gai