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He is considered 'great' in a paradoxical sense. Gatsby is considered 'great' by the measurement of dreams, his wealth, his larger-than-life personality, the festivities and joviality that, to others in the novel, mark him as a man of high stature and almost god-like in personal proportions.
The Great Gatsby is essentially about the rise and fall of the American Dream, and what meaning that held for Gatsby. It is also about how the American Dream is seen by Gatsby, not to obtain something materialistic, money, but to reach a goal not in keeping at all with what the American Dream stands for.