1. The phrase used when something funny happens, But you missed it, So It's basically Combining lol and wut (meaning What) Together.
2. Laughing at something that you don't understand
Friend: -Mumbling beginning of sentence- at the store!
Group: (Everyone laughs together)
You: (After hearing everyone laugh and not know whats going on) Lolwut??
Friend: *Makes random Quacking sounds*