What is this expression? Pronounced, approximately as... "Kay Wy".
I hang out with a bunch of people and this term/exclamation comes up quite constantly. Seems to be an expression of pleasure; "how nice"; "cool" or something of that sort. My dictionaries and online searches have yielded no results as of yet.
Anyone familiar with it and it's 'proper' usage?
If so... "Qué guay!" ... & let me know too.

Oh! Me! Me!

"¡Qué guay!" is just as you expected. It means "How cool!" It's pronounced just as it looks. Like .. Hmm... the letter "K" and g+why". Seems that only younger people (20s and younger) use this expression. While not certain, I think it's a relatively new thing that came up in the last 10-15 years or so.

Simply put: It's slang. I've only heard it as an exclamation like, as you said "¡Qué guay!" and rarely, if ever, as simply "¡Guay!".

Saludos, MadridMan

just to confirm...being of the 20's and under crowd I hear this expression ALL the time. I personally like it a lot an use it a lot, however I think it is a 'spain thing' in that I've used it while speaking with my friends in Argentina & Chile and I always get a "qué??" At any rate, very 'lengua de la calle' and I wouldn't use it in any formal situation.
PFitz

Actually, this expression was all the rage when I was here studying 16 years ago...so my guess is that it was new 15-20 years ago.

Can anyone recommend an especially good Spanish-slang dictionary?