what else does 'hip' mean?

Solution 1:

To clarify why hip in the sense of cool or stylish makes sense in this context one must also look at alternative meanings for happening.

The key to understanding what is going on in that quote (and why I initially, just like Judit, didn't think that this meaning of hip made sense in the context) is that both hip and happening can be used in a similar sense.

From OED:

happening, adj.

3. slang (orig. U.S.). Characterized by the most exciting, lively, and up-to-the-minute action or style; currently in vogue, fashionable, trendy. Cf. happen v. 6b, happening n. 3.

Solution 2:

It has been around since roughly 1904, and is of unknown origin. . Originally the word was hep. It was American slang meaning (per OED):

Well-informed, knowledgeable, ‘wise to’, up-to-date; smart, stylish. Hence as n., the state of being ‘hep’. Also as v., to pep up; hepped adj. (often with up) to be hepped on : to be enthusiastic about, ‘bitten with’. Cf. hep-cat n., hip adj

Nowadays it is more commonly hip. the OED has the following extracts on its use:

1904 G. V. Hobart Jim Hickey i. 15 At this rate it'll take about 629 shows to get us to Jersey City, are you hip?

1926 Detective Fiction Weekly 16 Jan. 640/2, I sashayed for a legger an' run into a rube hip agent with a bottle and some jake which helped some.

1938 C. Calloway Hi De Ho 16 Hip, wise, sophisticated, anyone with boots on.

1951 San Diego Evening Tribune 28 June a–2/5 We did it because we thought it was ‘hip’ or smart.

1957 J. Kerouac On Road i. i. 10 Elmer Hassel, with that hip sneer.

1958 W. Bryant Jive in Hi-Fi 13 The correct word is ‘hip’. It comes from a story of a fisherman warning young fishermen never to wade in deep water without hip boots on because they could run into trouble. So, when you hear the words, ‘I'm hip’ or ‘I'm booted’ it's said to let you know they have no fear of trouble or that they understand what's shaking [i.e., happening].

1959 Spectator 31 July 134/2 He has a fast line of jive-patter and uses such hip endearments as ‘angel-cake’ and ‘gorgeous’.

1959 Spectator 7 Aug. 161/2 Audiences there are hip to the latest gossip.

1959 Observer 4 Oct. 9/7 The only really hip Labour candidate.

1961 Listener 9 Nov. 786/1 As Norman Mailer would say, it's ‘hip’ to use obscure terms and meaningless symbols.

1966 H. S. Thompson Hell's Angels (1967) 68 Frank was so completely hip that he went down to Hollywood and bought the blue-and-yellow striped sweatshirt that Lee Marvin wore in The Wild One.

1972 V. Ferdinand in A. Chapman New Black Voices 472 We sometimes go in for that kind of living thinking

Solution 3:

In fashion, in vogue, cool, stylish, take your pick.

it’s something happening

The reason they contrast hip with the above is "happening" can also mean in fashion, in vogue. The sentence is saying however, that it is using "happening" with a different meaning.

Solution 4:

Tom Dalzell, Flappers 2 Rappers: American Youth Slang (1996) offers a series of theories from earlier sources about the origin of the term hip (or hep), although Dalzell has the good sense not to endorse any of them. Here, in chronological order are the six oldest theories that Dalzell cites:

The expression was given its name from the characteristics of an old circus man who was famous ... He would always say that he knew just what to do or what was being said. ... Finally, when anyone contemplated an act or expression around the show grounds, the gang would say, "Yes you are the same as Joe Hept." (How to Be a Detective by F.J. Tillotsen [1909]).

Hep ... derived from the name of a fabulous detective who operated in Cincinnati, the legend has it, who knew so much about criminality and criminals that his patronymic became a byword for the last thing in wisdom of illicit possibilities. (Vocabulary of Criminal Slang by L.E. Jackson and C.R. Hillyer [1914]).

"On the hip" used in the sense of a person who has a supply of liquor on his person. (Thomas Dorgan, San Francisco Call and Post, June 10, 1920 ...)

No doubt the Army, where the sergeant or drill-master commands, "Step, step, step" to a squad of recruits until from sheer weariness the command becomes "Hep, hep, hep," meaning of course, "Keep in step, on the alert." (Godfrey Irwin, American Tramp and Underworld Slang [1931]).

The sense of hep and hip is derived from an old phrase used in wrestling, "to have on the hip." When a wrestler had his opponent on the hip he had complete and effective control of him, and was in position to drop to the floor on top of his man, ready to take the fall. (Peter Tamony, "Origin of Words: Hep," News Letter and Wasp, August 25, 1939)

Nowadays you have to call a gone character a hipster. That comes from the fact that a real gone musician is said to have his boots laced right up to his hips. (Cab Calloway, Original Jive Dictionary, 1942). ...

Other origin theories mentioned by Dalzell include opium smokers' slang (because denizens of opium dens reclined on their hip while indulging), a Chicago saloon-keeper named Joe Hep, and a farmer's call of encouragement to his plow horses.

Of all these possibilities, only the wrestling sense of "on the hip" (cited by Peter Tamony in his 1939 explanation) is mentioned in Farmer & Henley, Slang and Its Analogues (1893)—not surprising since that meaning goes back to Shakespeare at least. (In The Merchant of Venice [1598], Shylock says, "If I can catch him [Antonio] upon the hip, I will feed fat the ancient grudge I bear him.")

But being caught "on the hip" in the wrestling sense of the phrase seems to have very little in common with being hip (or "on the hip") in the in-the-know sense of the phrase. My impression is that the twentieth-century meaning of hip is probably only coincidentally similar to the old wrestling phrase.