1. The condition of being insane: A case of intermittent lunacy was formerly supposed to be brought about by the changes of the moon, but is now applied generally to any form of insanity or idiocy.
2. Legally, but thought to be obsolete, a mental unsoundness and interfered with civil rights or transactions. Lunacy was also thought to be a fit or an attack of of an unsound mind.

Lunacy is an offensive term for any psychiatric disorder that renders patients legally incompetent and requires them to be taken into care: The term lunacy was supposedly never used by physicians in medical or psychiatric contexts.
3. An unintelligent, inconsiderate, or misguided behavior, or an example of it: Lunacy is now considered to be a totally foolish and stupid act.