Well, they are a variety of shorthand, most notably on the rise because of text messaging (SMS - sending textual messages via mobile/cellular phones).
Essentially the concept is to type phonetically, using the numbers that are comprised of a standard syllable: 1,2,4,8. (3 tends not to be used.)
The spelling contractions, lack of punctuation and phonetic replacements are extensive and most words that can lose letters whilst still remaining loosely readable do so; a lot of acronyms are thrown in to the mix as well. Therefore you get a multitude of sins produced in this medium, usually blamed for the downfall of literacy in youth.
Some example uses: (apologies)
hi m8, u out 2nite? - "Hi mate, [are] you [coming] out tonight?"
we 1! - "We won!"
w8 4 me m8, no1 else 2come. - "Wait for me mate, no one else to come [after me]."
Fortunately some people do still use proper English in such messages, but it is surprisingly uncommon. Most people seem very happy to dispense with the rules of language.