The meaning is “having the quality of” - when added to verbs it means "inclined to"
e.g. smell + y --> smelly, nose -> nosy, stick (v) -> sticky
The Y may replace E at the end of the word, e.g. bone->bony, nose -> nosy, shine -> shiny, etc. In this case, the split vowel digraph becomes a monograph. There may be consonant doubling after short vowels, e.g. skin -> skinny.
This suffix is very productive and can be added to almost any word. When the resulting word is not perceived to be a real word, a hyphen is often used before the suffix (e.g. sandcastle → sandcastle-y). A few long-established words ending with this suffix have distinctive spellings, such as wintry and fiery, which English learners might misspell as *wintery and *firey.