1. (also faery, faerie, fay, fae; euphemistically wee folk, good folk, people of peace, fair folk, etc.) a type of mythical being or legendary creature, a form of spirit, often described as metaphysical, supernatural or preternatural. Sometimes the term describes any magical creature, including miniature humans, goblins or gnomes: at other times, the term only describes a specific type of more ethereal creature.
The word fairy derives from Middle English faierie (also fayerye, feirie, fairie), a direct borrowing from Old French faerie (Modern French féerie) meaning the land, realm, or characteristic activity (i.e. enchantment) of the legendary people of folklore and romance called (in Old French) faie or fee (Modern French fée). This derived ultimately from Late Latin fata (one of the personified Fates, hence a guardian or tutelary spirit, hence a spirit in general); cf. Italian fata, Portuguese fada, Spanish hada of the same origin.
2. Slang: (Disparaging and Offensive) a male homosexual.
[Ida Rentoul Outhwaite]