One way to conceptualize homophobia is to think of it as existing at four distinct levels:

Personal or Internalised Homophobia...
is predjudice. It is the personal belief that lesbian, gay and bisexual people are sinful, immoral, inferior to heterosexuals or incomplete as women and men. Predjudice towards any group is learned behaviour; people have to be taught to be prejudiced.

Personal homophobia is sometimes experienced as the fear of being percieved as lesbian, gay or bisexual, out of the fear that one will be treated as if they were sinful, immoral, sick or inferior. This fear can lead to trying to 'prove' one's heterosexuality.

Anyone, regardless of their sexual orientation or preference, can experience personal homophobia; when this happens with lesbian, gay and bisexual people, it is sometimes called "Internalised homophobia"

Our internalised homophobia takes all of those messgaes that tell us that being lesbian, gay or bisexual is bad, or even lesser, abnormal, or just a cross to bear and plays those messages in our head.

This has many effects, from encouraging us delay or hide our sexualities, trying to make them mean less to us, through us decreasing our expectations of life, telling ourselves we don't really deserve much because, well, we're gay (or lesbian or bi).

Interpersonal Homophobia...
is the fear or hatred of people who are lesbian, gay or bisexual. This hatred or dislike may be expressed by name-calling, verbal and physical harassment, and individual acts of discrimination.

Lesbians, Gay and Bisexual people are regularly attacked for no other reason than their attacker's homophobia. Most people act out their fears of lesbians and gay men in non-violent and more commonplace ways.

Relatives often shun their lesbian and gay family members, co-workers are distant and cold to gay employee's; lesbian and gay men are legally prevented from becoming foster parents, and attempts have been made to fire gay and lesbian teachers.

Institutional Homophobia...
refers to the many ways in which government, businesses, churches and other institutions and organisations discrimmimnate against people on the basis of sexual orientation.

These organisations and institutions set policies, allocate resources and maintain unwritten standards for the behaviour of their members in ways which discriminate.

For example: Most religious organisations have stated policies against lesbian, gay or bisexual people holding offices; most schools fail or refuse to allocate funds and staff for lesbian, gay and bi support groups; and most businesses have norms for social events which prevent lesbigay employees from bringing their same sex partners, while heterosexual employees are encouraged to bring their opposite sex partners.

Cultural Homophobia...
refers to social standards and norms which dictate that being heterosexual is better than being gay or lesbian, and that everyone is heterosexual or should be.

While these standards are not written down as such, they are spelled out each day in television shows and print advertisments where virtually every character is hetereosexual and every sexual relationship involves a female and a male; or the assumption by most adults in social situations that all "normal" children will eventually be attracted to, and marry, a person of the opposite sex.
Often heterosexuals don't realise that these standards exist, while Lesbian, Gay and Bisexual people are acutely aware of these standards. The feeling that results is one of being outsiders in society.