Strange in a bold, modern, arty way — far outside what most people do or wear or make. If you call a piece of music or a hairstyle or a painting way-out, you are saying it has gone a long distance from normal, and usually you are half-admiring it for that. It is not an insult like 'weird' can be; it is closer to 'wild', 'far out', 'out there'. Two important things about this word. First, it is dated. It belongs to the 1950s and 60s — jazz, hippies, the first wave of modern art reaching ordinary people. Older speakers say it naturally; a young person today would more likely say 'out there' or 'wild'. If you use it now, it may sound like you are quoting your grandparents, sometimes on purpose, as a joke. Second, it is spelled with a hyphen and used before a noun or after 'be': a way-out idea, that outfit is way-out. Keep the hyphen, because 'a way out' with no hyphen is a completely different thing — an exit, or an escape from a difficult situation, and that meaning is far more common in modern English.