Faggot: The History

Faggot or fag, in modern English usage, is a generally term for a homosexual man.

Origin
The word has been used since the late sixteenth century to mean "old or unpleasant woman", and this would appear to be a likely derivation. Female terms, it should be noted, are often used with reference to homosexual men. The application of the term to old women may possibly be a shortening of the term "faggot-gatherer", applied in the nineteenth century to people, especially older widows, who made a meagre living by gathering and selling firewood. The primary traditional meaning of the word is indeed 'a bundle of sticks for burning' . Another meaning, especially common in Wales, is a kind of pork meatball covered in gravy.

Earliest Written Uses
The earliest known reference to the word in print was in the 1914 Jackson and Hellyer A Vocabulary of Criminal Slang, with Some Examples of Common Usages which listed the following example under the word, drag:
"All the fagots (sissies) will be dressed in drag at the ball tonight."
The word was also used by a character in Claude McKay’s 1928 novel Home to Harlem, indicating that it was used during the Harlem Renaissance. Specifically, one character says that he can't understand:
"a bulldyking woman and a faggoty man"

Religious Use
The New Oxford Review, a Catholic magazine, caused controversy by its use and defense of the word in an editorial. During the correspondence between the editors and a homosexual reader, the editors clarified that they would only use the word to describe a practicing homosexual. They defended the use of the word, saying that it was important to preserve the social stigma of homosexuality, which the word preserves.

Reference: Wikipedia