an exclamation used to express one's comic appreciation of something, generally a recent action or intangible idea.
Other acceptable spellings:
It is appropriate to occasionally drop the s or z at the end to lessen the intensity of the expression. The final degree of lessening the level of emotion (from "lolzer") is simply "lolz(s)." this is typically used to display almost a level of neutrality towards the previous comment, almost as if to simply acknowledge that it was said.