First, it is used to describe an amusing person, item or action. For example: His jokes are always funny. That was one of the funniest movies I ever seen!
Second, it is also used to describe something that is unusual or odd. It is usually used in a negative context. For example: This milk smells funny. I don’t think we should drink it. (The milk smells bad.) My stomach feels a bit funny. (I have an upset stomach.)