..on June 15, 1987, The New York Times editorial board decided to allow use of the term gay as a synonym for "homosexual." It was a linguistic victory of sorts for the LGBT community. The word "gay" was the term gay men preferred to refer to themselves, while "homosexual" had long been considered derogatory: the etymology of the word ("homo" is the Greek prefix for "same") called to mind the contrast with "heterosexual," thus implying abnormality. "Gay," on the other hand, had relatively little baggage, and was considered an affirmation of identity.
You can read a mini-history of terms used to describe members of the LGBT community here.