A person who, while playing Risk
(the board game), places all of his inital troops and first reinforcements in Australia (hence the "oz" part of ozfag) and then does nothing but defend his continent and attack 1 territory per turn in order to gain a risk card.
The "fag" part of the word is because people who do this are considered fags by other players in the game.
Player 1: I'll place all 5 reinforcements in Indonesia.
Player 2: Dude, stop being such an ozfag!