Melancholy is a state that is more mild than depression but is still a negative emotion that involves boredom and is a lingering unhappiness that can become depression or can fade into a more positive contentment. Melancholy is like sadness and is a term that was used before modern psychological fine-grained definitions to define a great number of generally down moods.
Although the term is seldom if ever used in modern diagnosis of mental states or of mental illness, the term still carries a connotation or conceptual reference that falls below the line of normality and above the lesser emotional states that give it a place along a line or spectrum of emotional states that affect humans.
Melancholy makes everything grey or at least a dark blue. It is an emotional state that is by no means unbearable and may be a way for an individual to know the difference between this negative emotion and the higher emotional states.
Without ever having some degree of being down, there is little or no way for human memory to make a distinction between those more negative feelings and the more positive ones that most people enjoy at times in their lives.
I would not call someone in even moderate depression, or a moderately depressed state, melancholy. I think the term is more akin to very mild depression with boredom thrown in and perhaps a lack of energy that is neither a hinderance to daily life nor something terrible to bear.
Melancholy does not induce visions of suicidal thoughts but only of a perhaps sorrowful longing for a loved one or a better state of mind.
Melancholy is a perfectly normal human emotional state and should not require and type of hospitalization or medication, necessarily as in the cases of more severe depressions or moods that are, likewise but opposite, too high in nature such as mania or hypomania.
I can imagine that someone who experiences a number of severe depressions will recognize melancholy as a term before or after the more severe states.
And, as someone who has himself experienced the extremes of bipolar disorder, melancholy would be a relief compared to the unbridled connectivity of mania and the horrible downs of depression that are at the polar ends of the disorder's spectrum.
Because the term "melancholy" has been thrown about, especially with the Smashing Pumpkins album with the term in the title, there has been some interest in what it means.
It is not, as the title of the album goes, "infinite sadness" but a melancholic state may be part of an existential sorrow that comes from a high degree of awareness of the human condition. This, I think, is quite normal- to have existential angst about human life and awareness.
One can, from certain authors, get a melancholy feeling after reading their dark or twisted tales. Catcher in the Rye or most anything from Kafka can leave one feeling that the world is a phoney, cold, meaningless place and the possibility of nihilism can creep in.
