In conservative Catholic circles, the general going theory is that “homophobia” is a fictitious psychological disorder made up by people in the LGBTQ contingent in order to shame Catholics into silence. (Oddly enough, this is exactly that the same way that LGBTQ people feel about “homosexuality” being defined as a psychological disorder...) In so far as the term refers to an alleged mental illness, this is fair enough. There are cases of real homophobia, mostly, as far as I can make out, in men who were sexually assaulted as young boys or in men with strong and severely repressed same-sex attractions. This is the disorder that leads to fag-beating and other forms of violence against homosexual persons, and admittedly it's not widespread within the Catholic world. However, the term is also used in a more colloquial way. Just as people will casually refer to particular behaviours as “obsessive compulsive” even when they occur in folks who don't fit the DSM-IV's definition of OCD, people will refer to other behaviours as “homophobic” even if they are not on the level of an actual, literal phobia.
Homophobia, as it is used colloquially, refers to an unreasonable fear of homosexual persons. This can be a fear that one will become “infected” with homosexuality, that one's children will be seduced, that gays are going to destroy civilization by having anal sex, that all gay men are sexual predators, that being around gay people will inevitably scandalize one's children, etc. Basically, when straight people are more apprehensive about being in the presence of homosexuals than they would be about being in the presence of other groups of sinners who are committing comparably severe sins, this is homophobia. It is often ideological, cultural or spiritual much more than it is psychological. To put it into Catholic language, it is the sin committed by people who are tempted to neglect the paragraph in the Catechism about avoiding unjust discrimination against homosexual persons, and it is a sin against charity.
Homophobic Christians avoid contact with homosexual persons. They resist forming close friendships with gays and lesbians and may counsel others that it is “sinful,” “scandalous” or “imprudent” to associate with “obstinate” homosexual sinners. They often justify this with the belief that somehow by ostracizing, shunning or otherwise refusing to associate with gays and lesbians they are sending a clear message about the evils of homosexuality: they are showing LGBTQ people that their sins are objectively damaging to society. In doing so they believe that they are witnessing to the truth in a charitable way. They tend to be afraid that if they take part in social situations where gay or lesbian couples are behaving in a normal way, they are helping to “normalize” same-sex relationships, and that they are thus guilty of scandal.
These beliefs are dangerously untrue. I know a lot of LGBTQ people, many of them people within the Church. I've read numerous conversion stories by LGBTQ folks who converted to Christianity. In absolutely not a single one of these stories was the shame or guilt associated with being shunned and cold-shouldered by Christians a source of edification, or a spur to repentance. On the contrary, one of the primary reasons which LGBTQ people give for leaving or despising Christian communities is that they were constantly subjected to homophobic behaviours and attitudes on the part of well-meaning Christians. Contrary to the claims made by people who are ideologically committed to homophobia, these behaviours and attitudes are not generally directed at homosexual acts, but at homosexual persons themselves. The claim that by being together with a partner a homosexual person is “flaunting” their sin justifies a series of behaviours which, if we directed them towards any other people, would clearly just be rude.
More to the point, a lot of LGBTQ people have been deeply affected by homophobic reactions on the part of Christians. Often these behaviours do actually have the intended effect: that is, they cause feelings of shame and guilt in their targets. The problem is that homosexuality is deeply connected with experiences of ostracism and loneliness, particularly on the part of same-sex peers. When a person feels ashamed, guilty and isolated because of their homosexual inclinations, this produces feelings of profound self-hatred and despair. It makes people feel “dirty.” They come to believe that God hates them, and they often end up acting out homosexually, either in order to assuage their loneliness, or to take solace in sensual pleasure, or because they despair of salvation, or out of a self-destructive impulse. In other words, what homophobic reactions actually do is not call the sinner to repentance, but put the sinner in a situation where they are compulsively driven back to their sin in order to gain some sort of relief.
The same can be said for sexual sinners of all kinds which is, I believe, the reason why Christ was so gentle with those who sinned according to the flesh. He told them about salvation, forgave their sins, delivered them from persecution, and bestowed on them the dignity and self-respect necessary to go and sin no more. The fire-and-brimstone diatribes he saved for the wealthy, the complacent and the self-righteous.