The alphabet soup quality of our community's initialism(s) has been a long-standing joke: LGBTQQIA etc (lesbian, gay, bisexual, trangender, queer, questioning, intersex, allied).
The language we use to refer to ourselves - and ask others to use to refer to us - is one of those periodically revisited issues. (FYI, "LGBT" is Equality NC's standard blanket term, with the occasional generic "gay" used for variety.)
Most folks are pretty much in agreement on not using older terms propagated by opposition groups, like the clinical "homosexual" or the denigrating "lifestyle" or the trivializing "sexual preference" ('oh, my ice cream preference is rocky road, and my sexual preference is hairy muscle men from Guatemala').
The most recent vocabulary issue comes from discussions of trans-inclusivity. (After all, you cannot have EqualiTy without the T!) Trangender or transgendered? (The first one, without the 'ed.') Pre-op or post-op? (Better to avoid these and talk about transition.) Trannie or he-she? (Bad, bad, bad! Those are totally derogatory and shouldn't be used.) Sex, gender identity, or gender expression? (It totally depends upon what you're talking about.)
The whole point of language is to establish a baseline for communication. If you're using language that offends someone else, even if that's not your intention, then instead of starting your interaction from a neutral point you're starting slightly negative. And we all know how inadvertent language issues can derail a conversation. And I daresay we've all had someone use a term around us that we've been uncomfortable with. What gay person hasn't had that alienating experience?
It's always better to use the accepted standard terms and phrases, if for no other reason than to avoid confusion.
Of course, ultimately it all comes down to substance versus surface. There are some homophobes out there who can make "gay" sound like the worst insult in the world. Conversely, one of my old rugby coaches is the crudest, most vulgar of men, tossing around racist slurs and antigay epithets and f-bombs like there's no tomorrow, while still being the most non-prejudiced, accepting person. (He likes to say that he hates all people equally, but underneath his tough, caustic exterior is a nougaty center - he's just a great guy.)
GLAAD is a great source for the prevailing standards, and here're four GLAAD links with more info on formal style/style guides and vocabulary: