I'd say #2, "being worn more and more by a growing number of people in styles that haven't reached their peak yet" is pretty accurate, but it's also too broad of a definition. It depends on how you define "trendy". If we're talking mass-market, middle class shoppers it's often a dead trend, or never was a true trend (if you by "trendy" mean something that is at the forefront of fashion). Polos (for instance) in peppy, cheerful colours are a base staple for many, many people year out and ear in.
#1 is true or false depending on what customers want... The industry spends a lot of money to pin-point coming trends (via trend agencies, market research and so on) but sometimes they fail spectacularly...