A corruption of the word "Owned." This originated in an online
game called Warcraft, where a map designer misspelled "owned." When the
computer beat a player, it was supposed to say, so-and-so "has been owned."
Instead, it said, so-and-so "has been pwned."
It basically means "to own" or to be dominated by an opponent or situation, especially by some god-like or
computer-like force.
"Man, I rock at my job, but I
still got a
bad evaluation. I was pwned."
OR
"That team totally pwned us."