It is a typo of the word "own" and it refers to completely dominating someone or soundly defeat, and it is usually spelled in all lowercase.
Online video gamers inadvertently stumbled onto a pop culture phenomenon when they began championing the use of "pwn," a misspelling of "own." Although many linguists around the world would prefer to bury this cryptic term, because it is actually an overly used Internet typo, we say no way! People who play online games are using it in everyday speech.
FYI: The term "pwn" is one of 16 words or phrases that appear in Lake Superior State University's annual List of Words Banished from the Queen's English for Mis-Use, Over-Use and General Uselessness. Whatever, according to Ralph Waldo Emerson, "Language is the archives of history." GAL!
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