When used as an adjective, it is the urban equivalent of being white trash, tacky, or otherwise without class and/or wealth.
I once overheard a conversation which I'll cite here as an example of this usage:
- Person A: How do you get your eyebrows to
look like that? Note: they looked hard, carefully
shaped, and glossy. Like when a person uses too
much hair gel and it hardens up.
- Person B: I use tire glue.
- Person A: Oh my gawd, that is so ghetto!
- Person B: It's bicycle tire glue, in
fact.
- Person A: Wow! You know you're really
ghetto when not only do you use tire glue for
your eyebrows, but you can't even afford regular
tire glue!