A slang term for an effeminate gay man.

"Fairy" is sometimes used by straight people in a broader and much more derogatory sense to refer to any gay man (regardless of swishiness) or any effeminate man (regardless of orientation).

This is one of those in-group terms, like nigger, that can be extremely offensive when used by someone who's not a member of the group, but is not offensive when used by a member of the group.