The usage meaning "underground monster town" is a term of art specific to video games/TTRPGs. Similarly, dictionaries don't tend to have an entry for the game-specific meaning of "boss."
Unlike "boss," though, the amount of traditional use of "dungeon" sees nowadays is basically a rounding error compared to the meaning Gary Gygax used. I bet a lot of younger folks don't even know the original definition. (Not that they haven't heard it used, but that when they did they were probably envisioning the Mines of Moria or whatever.)
The best theory I've heard -- I'd love to hear others -- is that this usage originates with the board game Dungeon!, which depicts an underground jail which also happens to be an underground monster town. Dungeon! was published in 1975 -- a year after Dungeons and Dragons -- but Gary Gygax played a hand-made version of it in 1972, then called "The Dungeons of Pasha Cada," when he was considering publishing it.
I find the RPG dungeon fascinating in how it's a nonsensical place that has no reason to exist outside of facilitating game mechanics.
