Is one of the phrases of randomness. Whereby a nipple is the object/part in question that is being scrutinised and made a joke of.
This makes a "lol nipple" the process of randomly pointing out the existence, scrutinisation and or revelation of a nipple, thereby being comic to one or more parties.
"Hey dude how's it going?"
'Im okay, how are you?'
"Could be better....OH MY GOD LOL NIPPLE!"
*Laughs at randomness*