It's basically a thinly veiled excuse to use/supplant another word, typically one they believe to be harsh or aggressive so they dare not utilize it. However, by using it interchangeably (especially aoe2 streamers) they really just mean to call someone an asshole, a ****, a bitch etc. That or they are describing someone's behavior in a demeaning way, regardless of if it's actually warranted. I've seen people decry trushing as "toxic," for example. Someone gets beat by a Persian Douche -- the opponent isn't a better player, they are lesser of a person to the person who got their behind whooped. Rather than acknowledging their opponent had superior gameplay on a given day at a given time, their opponent or their opponent's playstyle must be denigrated, belittled, and decried as "toxic."
It's an interesting and hilarious development, watching people utilize terms like it thinking they're superior for doing so, when they often just look like a baby wagging a rattle.