I know it is a malformation of ownage or to dominate your opponent beyond normal or average means of victory, but why is it Pwnage? Why the 'P' there? Was it a combination of two different words?
The best place to look is here, http://knowyourmeme.com/memes/owned-pwned
Owned (below: Variations) is a “leetspeak” slang word, derived from the traditional meaning of the verb “own”, as meaning to appropriate or conquer to gain ownership. The term strongly implies domination, severe defeat, and/or humiliation of a rival. For instance, “I owned the network at MIT” indicates that the speaker had cracked the servers and had the same root-level privileges that the legitimate owner of the servers had. It is also now primarily used in the Internet gaming culture to taunt an opponent who has just been soundly defeated (e.g., “You just got pwned!”) and as popular slang, outside of the internet. It is partly synonymous with a high degree of fail, and while sometimes these terms have been used interchangeably, it is more proper to say that someone or something is “fail” if they have been “owned.”
Edit as per comments.
The “p” in “pwned” alteration within the computer community has been believed to have have originated from typing too fast on the standard English QWERTY keyboard, thus missing the “o” and typing “p” instead. It could also be thought to pay homage to early hackers who tampered with phone equipment rather than computers--and “pwn” may simply be following this trend. (e.g., phishing, phreaking) According to one definition in the UrbanDictionary, the term “pwn” dates back to the 1960s at M.I.T. It was used competitively by programmers working on chess AI. When one out programmed the others he would refer to himself as King and the others as pawns. It started being used on Fido Net across the BBS world before internet went public, although it was used on the internet between university’s at the time.
The origin of the word is exactly what DavidYell said.
He ommitted the reason "p" is used, though, so here comes:
Using "P" instead of "o" has a simple reason; it comes from a common typo, when writing "owned" in a hurry. When you're pwning yuor opponengs, you mostly don't have tiem to correct your typos. :) That also is why it should be pronounced the same way.
PWN, or PWNED is derived from OWN respectively OWNED. Some people say the 'p' comes from the word 'pawn' (farmer, boor, chuff)..
But 'p' is actually standing for POWER -> POWERownd/POWERowned and thats then a even bigger denudation in sense of owning or dominating your opponents :-)