What does it mean to be in the fast lane in California?

As far as I can see, Vehicle Code of California states, that you should in fact keep right.

V C Section 21654 Slow Moving Vehicles

Slow-Moving Vehicles

21654. (a) Notwithstanding the prima facie speed limits, any vehicle proceeding upon a highway at a speed less than the normal speed of traffic moving in the same direction at such time shall be driven in the right-hand lane for traffic or as close as practicable to the right-hand edge or curb, except when overtaking and passing another vehicle proceeding in the same direction or when preparing for a left turn at an intersection or into a private road or driveway.

(b) If a vehicle is being driven at a speed less than the normal speed of traffic moving in the same direction at such time, and is not being driven in the right-hand lane for traffic or as close as practicable to the right-hand edge or curb, it shall constitute prima facie evidence that the driver is operating the vehicle in violation of subdivision (a) of this section.

(c) The Department of Transportation, with respect to state highways, and local authorities, with respect to highways under their jurisdiction, may place and maintain upon highways official signs directing slow-moving traffic to use the right-hand traffic lane except when overtaking and passing another vehicle or preparing for a left turn.

Generally speaking there is no Fast and Slow lanes on most highways in California or any other state for that matter unless specifically indicated by the lane speed limit, if you're referring to driving in the left lane on a multi-lane highway it doesn't necessarily mean that you will or should be driving faster than the one on the right.

There is a law in California and most other states regarding driving at such a slow speed that it impedes traffic, so if you have created a caravan of cars behind you like in the case of the police officer honking at you you probably were impeding traffic.

In addition to that you should watch for police and other emergency vehicles on the road because even if they do not run with the flashing lights you should give them the right of way unless you're unable to do so.

Now for the last point unlike Europe and a lot of countries outside the US on a multi lane highway in most states it is legal to pass on the right specifically so that the traffic creators, like you were in that case, can be overtaken.

Now as far as Speed Limits are concerned the enforcement and legality of exceeding the speed limit is determined by the state and in quite a few jurisdictions exceeding a posted speed on a highway by no more then 10 mph even, though it may technically be illegal will not cause you to be stopped by Police (too much work for little reward) and this fact is taken advantage of quite frequently by people.

Almost every state, if not every state, in the U.S. has a law that says that slower traffic should keep to the right lane(s) on multi-lane highways. In some states, the left-most lane(s) are considered passing lanes only and all traffic is supposed to stay to the right when not actively overtaking other traffic. This prevents exactly the situation that you found yourself in with traffic backed up behind you. Regardless of whether you're driving the speed limit, backing up traffic is dangerous and, in many places, illegal. In some states, you can even be cited for reckless driving for such behavior (even if you're going the speed limit.) So, in summary:

1) Please drive around the same speed as the rest of traffic where it is reasonably safe to do so (just don't drive right beside someone else doing the same speed when it can be avoided.)

2) When you must drive at a speed below the general flow of traffic, stay as far to the right as possible and only move to the left when you need to pass someone or to make room for someone to merge in from an on-ramp.

In my opinion in general it is best to drive on the slowest lane possible with your desired speed, i.e. if the slow lane is moving at the speed limit then just drive there. In many European countries this is actually illegal to drive on the faster lane if there is space on the slower lane (e.g. Germany). This way you are not blocking people who want to drive faster, whether they are breaking the law or not.

As many other people already said, in some areas it is "customary" to exceed the speed limit slightely, so most often clogging the fast lane just because you drive at the speed limit is not considerate to the other drivers.

The law http://www.leginfo.ca.gov/cgi-bin/displaycode?section=veh&group=21001-22000&file=21650-21664 in California states as answered above, that, regardless of the posted speed limit, one must always be in one of the right lanes EXCEPT to pass slower moving traffic, or if there is no space whatsoever on the right due to traffic congestion. Occupying the furthest left lane (closest to the divider) is expressly forbidden regardless of speed, if other lanes are available to the right, and especially if traffic is piling up behind.

In California, as in most places in the US, the posted speed limit is more akin to the average speed of traffic than to the maximum speed of traffic; this often confuses travellers from other countries. (On many roads nearly all cars will be technically breaking the law.)

The general rule of thumb on multilane roads is that the further you are to the left, the faster the speed of traffic; if cars are piling up behind you or passing you on the right you should move over to a lane further to the right. (On single lane roads, if you are driving slowly enough that cars are piling up behind you, it is polite to pull over to let the traffic pass. Some roads have pullouts that can be used for this purpose.)

If you have been driving in California for 6 years and not figured this out already then you may want to reconsider whether you are attentive enough to traffic patterns to drive safely on major roads.

As a bit of related trivia, a few decades ago the police in Maryland became unhappy with the state of their union contract negotiations and organized "rolling roadblocks" where groups of police cars drove the speed limit on major highways; while they left the furthest lane open, cars were hesitant to pass them, so traffic piled up for miles behind them.

Treat the far left lane as the 'fast/passing' lane. Meaning you are traveling in a two lane highway. Your in the far right / slow lane, you approach a car who is going excruciatingly slow and you wish to pass. Hop over to the 'fast/passing' lane to go around the driver, once passed return to the right lane.

Almost all drivers in the bay or south county do not respect the fast / passing lane, you are never to just sit cruising in the 'fast/passing' lane, the name its self is self explanatory. In California you are not to pass in the far right / slow lane, but in majority cases you have to because of drivers not following the rules of the road.

Another thing is side by side driving, just DO NOT ever ever ever do this. You are in right lane, you approach a vehicle going slow, you then move to left lane to pass BUT decide to go the same exact speed with vehicle to the side of you. Both of you are 'impeding/blocking' traffic, not allowing any one to pass on either side. People that do this cause road rage, if I come behind side by side drivers or people cruising in the fast lane, I lay on the horn. The roads are for traveling/commuting. Do not block or clog the road ways, we all need to be somewhere.

I have always lived in CA, and if you ask me, this whole speed limit fast lane is BS, Myself and many others have been pulled over for going 10 miles over the speed limit while traveling in the "fast" lane. Dont believe it, they need you to go faster than the speed limit just to make their quota. Trust me, drive 65, or whatever the speed limit is, and stay out of the "questionable" fast lane, and let all those morons who think its safe to go faster than the limit posted to get pulled over.