What does 侘寂 Wabi Sabi mean?

Wabi and sabi are two terms, not one. Sen no Rikyu did not invent them; he applied an existing austerity to tea and made it famous.

Written
侘寂 (wabi-sabi)
Literally
Two separate aesthetic terms, joined late. 侘 (wabi) is the austerity of the plain and the insufficient; 寂 (sabi) is the beauty that arrives with age and wear.
As slang
Not everyday conversation. These are critical and aesthetic terms, and a Japanese speaker is more likely to meet them in writing about tea or poetry than in a shop.
In anime
Rarely named on screen and frequently present: the held shot of a worn object, the deliberately unbeautiful bowl, the scene that declines to be pretty.

Wabi and sabi are two words. They are frequently presented in English as a single concept meaning the beauty of imperfection, and that gloss loses both the distinction between them and most of their history.

The two halves

侘 (wabi) carries austerity, plainness, and a kind of sufficiency found in not having enough. The older sense of the associated verb is closer to being distressed or reduced, and the aesthetic turn takes that condition and finds it worth choosing.

寂 (sabi) concerns what time does. Patina, wear, the tarnish on metal and the fading of cloth: beauty that could not exist in a new object because it is made of the object's age.

One is about how little you have. The other is about how long it has been there. They pair naturally and they are not synonyms.

The Rikyū correction

Sen no Rikyū is credited with inventing this aesthetic in a great deal of popular writing. He did not. The ideas predate him by roughly a century and developed in temple settings before he encountered them, passing through earlier tea figures who built the austere style he then refined.

What Rikyū did was consequential enough without the invention claim. He carried the austere approach into the tea practice of the powerful, replacing large and lavish tea spaces with small, plain huts. That is a documented change in how a wealthy elite was made to sit, and it is more interesting than a coinage.

What the English version dropped

The version circulating in design writing, home decoration and self-help has settled into a claim that imperfect things are beautiful and that a chipped bowl is therefore good. What that loses is the discipline.

The original is not a permission to be untidy. It is an exacting standard about which insufficiencies are worth anything, arrived at by people who could afford otherwise and chose the plain thing deliberately. A cracked bowl is not the point; a bowl by a maker who understood exactly how much to leave undone is.

Why the drift happened

Because the softened version sells and the strict one asks something. An aesthetic that forgives clutter is comforting; an aesthetic requiring the judgement to distinguish considered restraint from mere shabbiness is work.

The honest short version is that these are two terms from a tradition of tea, poetry and craft, describing austerity and age respectively, and that the interiors usage is a descendant rather than a translation.

Quick answers

What does wabi-sabi mean?

Two separate aesthetic terms, joined late. 侘 (wabi) is the austerity of the plain and the insufficient; 寂 (sabi) is the beauty that arrives with age and wear.

Is wabi-sabi an insult?

Not everyday conversation. These are critical and aesthetic terms, and a Japanese speaker is more likely to meet them in writing about tea or poetry than in a shop.

What does wabi-sabi mean in anime?

Rarely named on screen and frequently present: the held shot of a worn object, the deliberately unbeautiful bowl, the scene that declines to be pretty.