The Collaborative International Dictionary of English v.0.48:

Gully \Gul"ly\, n.; pl. Gulles. [Etymol. uncertain]
   A large knife. [Scot.] --Sir W. Scott.
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The Collaborative International Dictionary of English v.0.48:

Gully \Gul"ly\, n.; pl. Gullies. [Formerly gullet.]
   1. A channel or hollow worn in the earth by a current of
      water; a short deep portion of a torrent's bed when dry.
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   2. A grooved iron rail or tram plate. [Eng.]
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   Gully gut, a glutton. [Obs.] --Chapman.

   Gully hole, the opening through which gutters discharge
      surface water.
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The Collaborative International Dictionary of English v.0.48:

Gully \Gul"ly\, v. t. [imp. & p. p. Gullied; p. pr. & vb. n.
   Gullying.]
   To wear into a gully or into gullies.
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The Collaborative International Dictionary of English v.0.48:

Gully \Gul"ly\, v. i.
   To flow noisily. [Obs.] --Johnson.
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WordNet (r) 3.0 (2006):

gully
    n 1: deep ditch cut by running water (especially after a
         prolonged downpour)