Much like yourself, I tend to think of happiness as a barometer of sorts. If I'm unhappy, it means that something's wrong which needs fixing. It's not hard to see how this perspective can be reversed, though. To say that I seek to be happy and I do so by finding/building a satisfactory environment, or to say that I seek a satisfactory environment and I gauge this via happiness- in practical terms these perspectives are indistinguishable.
Happiness occurs when I am moved beyond that, by something which touches me positively. Playing a computer game, talking with friends, chasing my nephew around the garden, laughing at some silly thing with my wife. All of these are actively positive, beyond simple contentedness.
For example, the author could be 'happy' in most areas of his life, but the choices he made in his life could make his dating life harder (if he's single) and he finds he's less 'happy' in that area.
But happiness doesn't equal good life, there'are many different approaches to achieving it. I think "The fundamentals of Ethics" by R. Shafer Landau summarizes best the most important ethical theories.
It took me a long time to be able to recognize things like happiness and love.
To me, that's happiness.
Contrast this to pain, which most people attempt to avoid experiencing again.
Can someone explain to me what 'being happy' means?
I have consistently failed to answer anyone who asked me if I was happy or not. All I can say is that I am content or not. Which, for me, means that I am satisfied with the situation I am in. I can do what I want to do, when I want to do it and do not have to be bothered by things that do not interest me.
Happiness, on the other hand, is not something I understand. It feels like an utterly inappropriate term to use to describe this particular sensation. I have always regarded it as this magical state of being that would be used by people who also talk of 'achieving ultimate enlightenment'.
"The ultimate goal in life is to be happy" is what I hear regularly. And I have to keep wondering what could possibly be so wonderful about it that makes this worth being the sole focus of a person's life?
edit: Fixed some grammar.