While most people (gamers or otherwise) believe this word to be a typo of the word "ownage" there is another belief that it stands for "perfect ownage" just like "pwn" is "perfectly own."
Of course, this was probably made up afterwards.
Related: Plwn, Plwnage. A build on the classic "Perfectly own" by turning it into "Perfectly Legally Own." This is important because sometimes, when one is pwned, they will become indignant and claim that cheating was involved. No cheating can exist if they were plwned, though.
Only a few documented cases have existed, mainly because they were all within a few minutes of one another. Sadly, this is not a typo, but actually a misspoken version of Pwn. The individual who spoke this' name will not be disclosed, because he/she is very close to me.
"w00t, double pwnage!"
"i subjected him to my godlike pwnage"
Gamer1: Ha! Plwned!
Gamer2: WTF Nuh uh you cheated I saw you n00b!11
Gamer2: Tsch, no, that was perfectly legal pwnage.