Pwn5 is the ultimate way to say "
pwns", much in the same way "1337" is the ultimate way to say "
l33t". Essentially it means "is much better than" or "humiliates", and is most commonly used as a verb.
The "5" represents the "s". It is also mid-way between 0 and 10, so is considered a direct hit between the eyes i.e. perfect. This stems from the origins of the word in online multiplayer gaming, where a perfect shot is respected.