It is somewhat an adjective, using the same basic definition of "Lol" added "Zilla" Which came from the original movie "Godzilla"
Because of "Godzilla" Being a giant mutation, the actual feature of the character being a giant, and adding "Lol" means it is a bigger "Lol" than the original phrase itself. Expressing it even more than normal.
"Did you see that guy fail at that jump!?!? LOLAZILLA!!!!!!"
"Man this guy is a complete retard, he's so fat and thought he would be "Cool" The guy jumped on top of is bunk bed not only breaking the top but also the bottom bunk. LOLAZILLA!!!"