It is primarily used as that. Technically though it just means someone who's not 'a person of the book' that is muslim, christian, or jewish.
Though since samven said shias aren't muslim (and they sure aren't christian or jewish) I'm not sure how the technical definition doesn't apply.
Here's another example of how vicious the interplay is between Sunnis and Shias.
http://answers.yahoo.com/question/index?qid=20110315105836AAfm4Qq
It's incredibly ridiculous and it's a big part of what's happening in Bahrain right now. There are a *ton* of people in the Arab Sunni world that are convinced of the idea that:
"All I know is that they are not the Muslims' brothers in faith, and they are not brothers in humanity. "
and
"Shias and Sufis are knowingly denying and refusing to acceept the truth; the righteous way, so in my eyes, they're far worse."
And using that kind of shit and adding in fear-mongering about Iran allows them to justify whatever the Al-Khalifa regime does to brutally repress the Bahraini people.