Two (or more) people roll play that they are having sex. It's like sextexting in a few ways. Online sex is done by messaging through a chat box of some sort (it depends on what website your on) Simple by using the asterisk * or dashes - to mark what your doing.
"Come here *Grabs you your hand and kisses you*"
"Come here -Grabs you your hand and kisses you-"
Though the asterisk is more common to use, some people uses the dashes.
It may not be as fun as the real thing, but it's still pretty fun. Trust me.... I know ;)
Example on how to have online sex -
Person 1 (p1) - *lays on top of you*
Person 2 (p2) - u love being on top... dont you?
p1 - Yes i do *kisses you*
p2 - *Kisses you back*
p1 - *holds you arms above your head and kisses you neck*
p2 - *moans* you know my sweet spot
p1 - Yes i do *goes back to kissing you neck*
Hope that helps :D