Fag is a swear word and stands for faggot.
The word "fag" is especially common in the English-speaking world and means something like "faggot". This is a swear word that is often used not only for men who appear particularly feminine, but for gay men in general.
At a time when homosexuals are unfortunately still discriminated against by many people in society, the word (unfortunately) is still part of everyday life for some homophobic people. It often even precedes physical assaults on those affected.
Within the Scene Fag is also sometimes used to express dislike of another gay man. In these cases, however, it is often not about criticising the person in question in his capacity as a gay man. Rather, other factors, for example a perceived wrong character, usually play a role.
By the way, "fag" is not a particularly new swear word. What is changing again and again within society, however, is the willingness to use violence that is associated with the corresponding insults. Attacks in the form of acts of violence have shown that the inhibition threshold is apparently sinking further and further and that it is no longer sufficient for many homophobic people to "only" verbally abuse.
Why people use the word fag at all can only be guessed at and probably only ever answered individually. Often it is the fact that an open, colourful society does not fit in with one's own moral concepts that makes people want to set themselves apart by calling people names. Education also plays an important role in this context.