This originated obviously as a typo.. from a custom warcraft map! after winning, it's supposed to say "the enemy got owned" but typo, and it said "the enemy got pwned" at first everyone was all joking about it, but then it became one of the most popular leetspeak words. Most propular ones are obviously is n00b, hax, and pwned.
But yeah, it means to have excessive skill over others and to take them down really badly... well, usually that's the case.