Today, the intensifying, exclamatory senses of the adjective are the only ones to be heard, and these are a distinctive mid-20th-century development.
"The picture was sold for a fabulous price." "That's a fabulous car!"
The oldest senses, dating from the mid-16th century, all relate literally to the notion of a fable or myth. As a result, in Shakespearian English, we find fabulous meaning "mythical, fabricated, invented". It's used just twice in the plays.
In Henry VI Part 1, the Countess looks scornfully at the English general Talbot, thinks that his appearance does not live up to his reputation, and says: "I see report is fabulous and false" (II.iii.17). The collocation with "false" is a clear indication of the meaning we need.
And in Henry VIII, Norfolk describes to Buckingham the meeting of the kings of England and France, comparing the event to a "former fabulous story" (I.i.36). He doesn't mean that it was a marvellous story, but that it was a story befitting the realms of folklore or mythology.