It specifically refers to the mentality and lifestyle of some American ghetto inhabitants and vaguely to the mentality and lifestyle of poor African-American urbanites.
In the media 
Ghetto fabulous is a stereotype in lower income urban America. In this sense, it means individuals who have mentally created an affluent lifestyle while not always having any luxurious possessions or wealth. As a comedic device, it often dramatizes and draws attention to life in the ghetto. For example, in the motion picture B*A*P*S (or Black American Princesses), the protagonists pretend to belong to an upper-economic class, but in reality they live a lifestyle that is full of superficial glamour also known as ghetto fabulous.
Ghetto fabulous style has moved into the mainstream along with hip-hop and rap music icons adopting the style though sometimes calling the fashion "uptown couture" with common "ghetto fabulous" styles mixed with couture labels, including new upscale/designer labels created by hip-hop moguls including Sean Combs, Jay-Z, and Kimora Lee Simmons.
Common assumptions 
Uses and interpretations of the term vary. For instance, a person who is living "ghetto fabulous" lives above their means, sometimes with means of support other than legitimate work. Money and housing may come from welfare assistance, relatives, or illicit activities. However, the person is not considered poor. In fact the person may appear well-to-do. Frequently, the term is used in reference to a person's material possessions such as a luxury car, brand-label clothing and accessories, or jewelry. The term may also reference personal grooming habits such as having one's hair and nails done, being tattooed, or having cosmetic platinum, gold or silver caps applied to the teeth. While the term "ghetto fabulous" may be used to specifically point to any of the above, it is most frequently used a generalization, e.g., "s/he is living (a) ghetto fabulous (life)." Buying from and vibrantly displaying designer brands such as Louis Vuitton and Gucci traditionally go hand-in-hand with the trend. Many have gone as far as to customize the exterior and interior of their cars to be coated in the Louis Vuitton design, and Gucci Mane's stage name is likely a by-product of ghetto fabulous culture.