Bad Taste is sort of a nebulous concept, but basicly it's used to refer to ideas, comments, artwork, situations, and behavior that is needlesly ugly, vulgar or juvenile or is used in a very inappropriate situation without much consideration of the feelings of others.
An example of bad taste would be making out with your date at a funeral. Dead Baby Jokes are another example of something in bad taste, even more so when they are told in the presence of expectant parents. Giving a blow up doll to a recently dumped friend would also be in exceedingly bad taste.