If someone calls you loco, it means they think you're nutty or eccentric. Your friends will think your dog is completely loco if she spends hours every day chasing her own tail.
You can use the slang term loco when you're commenting on the craziness or irrationality of a person or situation. You might say, for example: "This meeting is totally loco — everyone's talking at the same time!" Loco comes from American English, which borrowed it from the Spanish loco, "insane." Its roots are uncertain, but it may stem from the Arabic lauqa, "fool."