1637 - the Oxford English Dictionary describes gay as "addicted to social pleasures and dissipations. Often euphemistically: Of loose and immoral life"
1800s - "Gay" which means to "copulate" was the slang term for female prostitutes.
1900s - The French slang "gaie" which means homosexual men was out.
1935 - "Geycat," the slang term that means a homosexual boy was out.
1955 - P. Wildeblood notes in his autobiography on the inhumane treatment against gays called "Against Law". he quoted, "Most of the officers had been 'gay' ... an American euphemism for homosexual".
This is my humble opinion, looking at the process while noting this: The Bible translaters replaced or added to the word "arsenokoites" which means "boy-bed" in Greek (in relations to male prostitutes), with the word homosexual to describe the sexual orientation as a form of immoral act. This happened back at 1949 in the Revised Standard Edition of the Bible. This is related to the probably correct slang to be used according to the male prostitutes back in those days.
I conclude that the word "gay" was supposed to mean boy prostitutes in the modern world before 1949 (some say 1951). But I believe, when P. Wildeblood's book came out, it is one of the revolutionizing moments in history when "gays" are treated badly like prostitute dogs in the 60's.
This is interesting, because along with the formation of the movement for life and freedom for homosexuals from other parts of the world, started what is now known as "gay" pride. Which probably is to tell the world that homosexuality has nothing to do with gigoloism, but all about love and diversity of life, and the freedom of it to live in equality with straights.
Since it is simpler to prounounce, it has been gay ever since.
A complete look at the word "gay"'s evolution according to the Oxford English Dictionary can be found here at this link.
(Taken from my reply to a question at Yahoo Answers, which was elected as the "best answer").