Something that's frosty is covered with pale, icy frost. If you live in Vermont, your car windshield is probably frosty most winter mornings.
You can describe the weather as frosty when there's a sharp chill in the air, or you can use the word more literally, to mean "covered in frost," like your frosty front lawn. When a person is frosty, however, she's emotionally cold — haughty, aloof, or even unfriendly. Frosty comes from the Old English fyrstig, "as cold as frost."