-
I don't get what you mean, here in east lancs, it's just a colloquial term. Generally accepted to mean that beurocrats have stopped using common sense in their decisions ranging from 'where to put your wheelie bin' to H&S.
It's normally used in this type of sentence "And you know what, they're not forcing her to carry the rapists child to term! It's political correctness gone mad!"
-
It's typically used to trivialise the view that discrimination and prejudice are wrong. It's a cliche and meaningless, and gets thrown in when the argument has otherwise been lost, very often by people who would love to be just a little bit racist/sexist/homophobic, cause a little bit of "harmless" offence, have a laugh at people because of the colour of their skin and not be frowned upon.
It took until this morning for someone to throw in "political correctness gone mad" (or a version of it). You know you've lost the argument when you do that.