How did the slang meaning of “owned” come to be?

Question

Why does

Dude! I just owned you!

mean that the speaker did really well against "Dude" in some sort of competition or game?

Answer 1

Believe it or not, Wikipedia actually has an entire article dedicated to the word.

Owned is a slang word (e.g. "Wikipedia got owned!"), that originated among 1990s hackers, where it referred to "rooting" or gaining administrative control over someone else's computer.

The term's original usage was close to that of the traditional meaning of the word "own" — for instance, "I owned the network at MIT" indicated that the speaker had cracked the servers and had the same root-level privileges that the legitimate owner of the servers had. "Owned", a later variant, became more common in the late 1990s, as did the more abstract usage referring to any compromised security mechanism. By 1997, "owned" was regularly used in website defacements, and it subsequently spread to gaming circles, where it was used to refer to defeat in a game.

Answer 2

The term "own" originated in hacker culture, and referred to compromising and gaining control of a computer system. Soon after its inception, like many hacker terms, it came to be deliberately mistyped (as "pwn"); like all such obfuscated jargon, it retained its original pronunciation. With some digging, you might be able to find an earliest-known reference, but the chance is slim since it's so ubiquitous. Like a large amount of hacker slang, it was simplified and appropriated into the gamer culture, where it took on its current meaning of "to defeat" or "to be superior to", and its current widely varying mispronunciations such as "pown", "pawn", and "pun".