If you're cagy, you're cautious and wary of revealing any important information. You might suspect a surprise party if all of your friends act cagy right before your birthday.
Politicians are often cagy when they're asked difficult questions by reporters, and parents can get equally cagy when their kids start to ask questions about how exactly Santa Claus fits down the chimney. In either case, people withhold information or dole it out in a careful, deliberate way. It's more common to spell the word cagey, and while experts know it was coined in the US, the origin is mysterious.