Allow me to shed some light...
Background:
The phrase comes from an animation at the beginning of a video game. The game was named "Zero Wing", and was for the old (first) Sega System (I think).
Link:
Here is a link where someone has put the animation on a website, and also made a techno/mix/video for it. It's kinda neat.
http://www.stileproject.com/base.swf
Why it's so funny: (IMO)
It's funny because it's a bad-english way of saying "I own you", or "I'll dominate you - there's no hope", or in the script-kiddie-speak "1 0W|\| J00". It relates to gamers, and so gamers use it. It's a form of bragging. It's like a taunt in a game of UT... I'm sure there's quite a few people out there who have it bound to a key.
I think it's funny, but as with everything - ONLY IN MODERATION. I have used it, but any time now I'll see someone spam it and it'll annoy me. Oh well.
I hope this clears it up for you. If not, let me know.