Once used by homophobes to negatively describe a gay man or woman, the term is now being used by the gay community itself as a positive or neutral descriptive of each other. By embracing a word that was used to attack or degrade, the gay community has demagnetized the strength of the word, making it a common everyday term. This lessens the effect of the word when used against them.
This process by which a word meaning changes from negative or neutral to more positive is called amelioration. The word "fag" has also been ameliorated by gays themselves. Other communities embrace words used to degrade them as well, such as women using the "B" word to describe each other or African-Americans using the "N" word to describe themselves.
Nonetheless, much care should be taken when using an ameliorated word as some may take offense. For instance, just because gays have embraced the word "queer" does not mean it cannot be used as a term of hate by a homophobe.
