Actually, I think it's short for "Radical!" ... meaning something is way too cool...

Rad means cool when you are using it in conversation. It is not formal, and you usually use it like "thats rad." "That song is rad!"

Yes, rad is used as slang to mean 'cool' or 'awesome,' conveying that the speaker likes that thing they are referring to. It was popular in the early 1990's, particularly in California. People rarely say it now unless they are trying to imitate the surfing culture of the 90s.