A simplified version of - Pistol-owned from counterstrike. newbs run around with machine guns while veterans with real accuracy use pistols and 'Pistol-own' people, or pwn. May even date back to Splatterball (on AOL), where Pistol-owning was also used.
another possible beginning- pwn = Pawn, from Everquest, where the weakest creatures were pawns. orc pawn.... to get beat by a pawn sucked, you were pwn'd...
I pwn j00.
My mithril bp pwns your leather one.
a wanna be EverQuest. you play to level 40 and get bored.
i used to play ffxi, until i realized it sucked, unlike EQ.