Author Judith Warner wrote a piece last week about homophobia among teenagers and the way that the words "fag" or "gay" are, in that set, some of the worst things you could call another kid.
When "gay" is used as a slur, it is used not literally but figuratively; it is what gayness signifies stereotypically that is the insult. Do you like musical theater, wear bright clothes, do well in school? "You are so gay." Gayness, here, is a kind of nerdiness.
While Warner's discussion was about adolescent boys, as an adult I must confess that I still hear people say, "that's so gay" to express distaste. What isn't the first thing I feel? Offended. I get a little embarrassed for the person who said it, even if they're being ironic.
What about you? Do you get offended when someone uses the word "gay" as an insult?