Pwned is a highly disputed word that has evolved over the years from being a simple typo of the word "owned", which is commonly used in multiplayer games around the world. Today it had some to be a combination the words "owned" and "pawned".
Owned meaning that the a person was defeated so badly, that he has become the Owners bitch.
Pawned meaning that the newly owned person is not wanted, or worthy of the owners presence. Thus the owner has disposed of the person in a cheap manor (Pawn Shop).
To be pwned is to be owned, but at the same time rejected as being not worthy, and then disposed of.