The word's origin is thought to be a typo of the already incorrect labtop.
The mistake was unexpectedly embraced -- airhead teenage girls and one wannabe L337 asian teen rejoiced in the purchase of their new "labtob" notebook computers.
Utterance of the word typically precedes a swift blow to the face with said computer.
Eric: No it's labtob.
Me: Lap. Top. It sits on the top of your lap.
Eric: Mine is faster than yours.