It means, "laugh out loudcakes." Now, some people like to say "lolpie," but that is incorrect. Lolcakes is more grammatically correct, and is used in everyday language more often.
Jeff: Why did the chick cross the road?
Don: I don't know, why?
Jeff: To SUCK SOME FUCKING COCK.
Don: ohhh lolcakes!
someone who exceeds the boundaries of a normal "lol," a descriptive word used to express a certain person or creature which is deemed worthy of ridicule, especially for being a noob.