It's a term created in Winnipeg in 1992, I believe, by and for indigenous people because they weren't necessarily comfortable using the words gay and lesbian. They wanted language that reflected their own experiences. It's a cultural term that for some means gay. If we were to look at it, it could mean gay or lesbian.
As well, many two-spirit people use it to describe their experiences being trans or gender non-binary. It's in the way that our two-spirit elder describes...and less a term about having male and female in one's body, but more about not adhering to gender or sexual binaries, and also about living. She describes two-spirit as an experience of living in two worlds: living in a white world and in an indigenous world.