Wow! So many great answers! I'm surprised, it seems we are all mostly on the same page. I honestly didn't expect that.
To me, and this has pretty much been said, it comes down to do you enjoy the majority of what you are doing when you do it. If you don't enjoy it, but you do it for other reasons, that's a sell out.
I agree that most people that use the term are typically jealous on some level...and/or have to rationalize why they aren't in that position themselves.
A sell out doesn't have to be just money either. I know people who sell out to fame, or to impress others...sometimes trying to impress other musicians. I think it's where the term "guilty pleasure" comes from to a point. If you like a song, but don't want to admit it to your "musician" friends because of what they think...I personally believe you are selling out. Just be yourself. If they don't like you for something that trivial, what kind of friend is that, or why the heck would you want to impress them?
I could go on...and maybe will later; but I think you all have said it better than I would.
I think it's great to have a conversation like this! It shows the strength of the community.