it's a take off on '0wned' or 'owned' .. ie: you got owned and or hacked into..

i think some dude typoed and hit the P instead of the O one day and it caught on to pwned...

but i know urbandictionary would have the answer..

i've also heard read 'ownage' and 'pwnage' ...

bottom line it's saying you been had... smile

edit:.. wiki has a much better explain than i do laugh

http://en.wikipedia.org/wiki/Pwn