Federal (Fe • the • RAL) means ugly. It comes from feo(a). It is typically used in reference to people who are not good looking. Using federal is just as offensive as using feo or fea. Beware.
Gualberto: Está súper federal la amiga de tu chava.
Benito: Esa no es su amiga, ¡es mi vieja pendejo!
Gualberto: Your woman's girlfriend is truly ugly.
Benito: That's not her girlfriend, that's my woman you moron!