This is the part when as part of old gay-GAF I feel like I can finally contribute in this thread.
Homosexuality simply wasn't visible, it was incredibly taboo. On of my contemporaries was absolutely shocked just a few weeks ago when I told him Freddie Mercury was gay, he simply couldn't believe it, and he has seen the "I want to break free" video, and is very aware Mercury was hiv positive and died of aids. Not saying that those things make him gay... but come on!
Since there was literally no representation, there was some kind of "freedom" into putting all this gay stuff and most people were completely oblivious to the fact, for most it was just as Bayo said, over-the-top antics. But gay people knew, it was practically a secret society that evolved its own codes. This of course has a lot of background from the days of censorship and the Hays code (which has a wonderful documentary,
the celluloid closet, which it now really needs to be updated with development in the recent decades
).
As always we have lead pop culture and later mainstream culture appropriates it, so you got that all that "gay" stuff of perms and craziness that was the 80s became the cool thing and everyone just followed, without knowing.
Little known fact, all that leather and rough stuff from rock and metal bands? That comes from Judas Priest, close to that time, Robert Halford the lead singer was gay (closeted at the time), and he wanted a shocking image for the band, so he decided to adapt the whole gay leather scene into it (which is as old as some of our parents
), and it became the staple of hard rock and metal.