From The Jargon File (version 4.4.7, 29 Dec 2003):
owned
1. [cracker slang; often written “0wned”] Your condition when your machine
has been cracked by a root exploit, and the attacker can do anything with
it. This sense is occasionally used by hackers.
2. [gamers, IRC, crackers] To be dominated, controlled, mastered. For
example, if you make a statement completely and utterly false, and someone
else corrects it in a way that humiliates or removes you, you are said to “
have been owned” by that person. When referring to games, “I own0r UT GOTYE
” means that one has mastered Unreal Tournament, Game of the Year Edition
to such a level that even the hardest AI characters are mere lunchmeat, and
that no ordinary mortal player would even receive a point in competition.
There are several spelling variants: 0wned, 0wn0r3d, even pwn0r3d. Hackers
do not use this sense.
P