From Anne Cutler a while ago, a postcard from Tasmania (where she and Bill were visiting their childhood haunts) depicting Little Penguins (“the smallest of the 17 species of penguin and … the only one to breed in southern Australia”). From Wikipedia:
The Little penguin (Eudyptula minor) is the smallest species of penguin. It grows to an average of 33 cm (13 in) in height and 43 cm (17 in) in length, though specific measurements vary by subspecies. It is found on the coastlines of southern Australia and New Zealand, with possible records from Chile. In Australia, they are often called Fairy penguins. In New Zealand, they are more commonly known as Little blue penguins or Blue penguins, owing to their slate-blue plumage. They are also known by their Māori name: kororā.
At the Aquarium of the Pacific in Long Beach CA:
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On to fairies and fairy X (with fairy as a modifier), as in fairy penguin.
From NOAD2 on fairy:
noun 1 a small imaginary being of human form that has magical powers, esp. a female one. 2 informal, offensive a male homosexual. [possibly from use for specifically female fairies]
adjective [that is, modifying noun] belonging to, resembling, or associated with fairies: fairy gold.
On the homosexual sense. From OED3 (December 2013):
slang (orig. U.S.). An effeminate or homosexual man. Freq. derogatory.
[first cite] 1895 Amer. Jrnl. Psychol. 7 216 This coincides with what is known of the peculiar societies of inverts. Coffee-clatches, where the members dress themselves with aprons, etc., and knit, gossip and crotchet; balls, where men adopt the ladies’ evening dress, are well known in Europe. ‘The Fairies’ of New York are said to be a similar secret organization.
[as modifier] slang (orig. U.S.). Chiefly derogatory. Designating an effeminate or homosexual man; of or relating to such men. [first cite 1925]
This looks like the common shift of words denoting females to uses denoting effeminate or homosexual males.
Belonging to or associated with fairies. Under ‘belonging to’ or ‘associated with’ fairies (the magical beings): a range of fairy X compounds, some of them semantically transparent, some of them requiring considerable background knowledge for understanding:
fairy gold, fairy godmother, fairy ring , fairyland, fairy tale, fairy queen, fairy dust, fairy wand, …
Notes on fairy gold, from the Merriam-Webster site:
1 money held to be given by fairies but turned into rubbish when put to use
2 wealth or prosperity that may vanish as swiftly as it is acquired: precarious or illusory wealth <was to have been, according to those who profited most from its fairy gold, an era that would transcend the business cycle — Stringfellow Barr>
And a fairy ring is a circle of mushrooms, believed to be a dancing place for fairies.
OED3 notes an association between the foxglove plant and fairies:
The number of regional names for the foxglove with fairy as the first element is notable: many have precedents or parallels in Celtic languages.
Resembling fairies. Resembling in various ways. For instance, by being small or delicate, as in:
fairy penguin, fairy shrimp, fairy cake, fairy cycle
Fairy penguin above. Then fairy shrimp, from Wikipedia:
Anostraca is one of the four orders of crustaceans in the class Branchiopoda; its members are also known as fairy shrimp. They are usually 6–25 mm (0.24–0.98 in) long (exceptionally up to 170 mm or 6.7 in). Most species have 20 body segments, bearing 11 pairs of leaf-like phyllopodia (swimming legs), and the body lacks a carapace. They live in vernal pools and hypersaline lakes across the world, including pools in deserts, in ice-covered mountain lakes and in Antarctica. They swim “upside-down” and feed by filtering organic particles from the water or by scraping algae from surfaces. They are an important food for many birds and fish, and are cultured and harvested for use as fish food. There are 300 species spread across 8 families.
Artemia salina:
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Then fairy cakes, small versions of cupcakes (in British English) and fairy cycle, British English again, a type of low small-wheeled bicycle for children.
I’m not sure where fairy bread fits in here. From OED3:
Cookery (a) = French toast … (now rare); (b) chiefly Austral. and N.Z. a dish of sliced bread and butter covered with hundreds and thousands (‘sprinkles’). [first cite 1874]
Another type of resemblance comes from the fact that fairies are unnatural, non-standard, or ‘perverse’ creatures (another possible contribution to the ‘effeminate or homosexual male’ sense of the noun fairy). So we get fairy chess. From Wikipedia:
Fairy chess comprises chess problems that differ from classical (also called orthodox) chess [or orthochess] problems in that they are not direct mates. The term was introduced by Henry Tate in 1914 and has resisted change since then.
A very common sort of fairy chess is antichess (which I play as giveaway chess). From Wikipedia:
Antichess (also known as Losing chess, the Losing Game, Giveaway chess, Suicide chess, Killer chess, or Take-all chess) is a chess variant in which the objective of each player is to lose all of his pieces or be stalemated, that is, a misère version… Antichess is one of the most popular of all chess variants.
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