"When people are free to do as they please, they usually imitate each other." -- Eric Hoffer
A fad is a behavior or meme (in the loose sense) that passes through a population in a shorter time than is dictated by reason (for example, there was a good reason to stop using LPs. Lava lamps, on the other hand, are still just as practical as they have ever been. Lava lamps were a fad, LPs were a matter of convenience).
'Fad' most often refers to the activities and desires of the younger set, from pre-schoolers and Elmo to young adults and Goth. This may be because middle-aged people have comparatively boring fads (buying exercise bikes to furnish their garages, for example). Despite popular opinion, fads can be good, healthy fun. Just don't get carried away.
The etymology of the word fad is muddy, but entertaining: it first appeared in 1834, and was used to mean a hobby or a pet project. By 1881 it was being used to mean a fashion or a craze, in the modern sense. We're not sure where it came from, but the two best guesses are that it is either a shortening of faddle (or fiddle-faddle), meaning 'to play with', or a shortening of the French fadaise, meaning a 'trifle', or 'nonsense' (It is fun to note that fadaise comes from the Latin fatuus, menaing stupid.)
Also, an acronym for Flavin Adenine Dinucleotide.