I use it mostly in times of excitement. Positive excitement. Like a "thatta boy" type scenario. "Good job Dude!" Or a "Dude, how have you been? Haven't seen you in forever!" Endearment term/word.Geeze... I'm probably guilty of that. I've been around urbanites so much that I speak it without thinking.
On the other hand, I really don't use that word unless there is some amount of disrespect involved already, urban colloquialism or otherwise.
Then, yes, there is the "What were you thinking, Dude?"