In the late 1990's-Early 2000's, this internet slang term's meaning was literally 'laugh out loud', and was used to express the laughter of the user of the term. In these times, the term was used appropriately and was not over-used.
Nowadays, the term is overused to the point that people loathe the usage of the term. It is now used to simply attempt to advance the conversation, but often instead kills the conversation. The term is also used when the person is not paying any attention to the conversation, and has nothing relevant to say. The person will then reply with 'lol', and the conversation will be effectively ended. The slang terms 'XD', 'hahaha' and such are occasionally used instead.
The term is also often used by the younger generation in actual real-life conversations, which has the same meaning as its new meaning.
Person 1: I just finished watching <funny movie name>, and <name> said <funny line>.
Person 2: Lol! (Person 2 is genuinely laughing at Person 1's statement).
New Internet meaning:
Person 1: I was walking down the street today, and someone blew smoke in my face.
(Five minute wait)
Person 2: Lol (Person 2 is using the term as a way to attempt to advance the conversation, which has now been killed by Person 2's statement).
Real-life conversation usage: Same as meaning 2
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