"Hacked by Chinese!" appeared in the text of the Code Red Worm which attacked a vulnerability in Microsoft IIS web servers in July, 2001. In some internet forums, the phrase has become a put-down synonymous with "you lose!" The meaning of the original term is obscure; perhaps a reference by the originators of the worm to a supposed Chinese-American internet war, though the origin of the worm, which infected some 250,000 computers within 9 hours according to NIPC, was never traced.
Slashdot comment: "Hacked by Chinese!" -August 7, 2001, on news of a new human vs. machine chess match.
A phrase popularized after the Code Red worm appeared with this text in it. Basically nonsense. Code Red originated from China. Often used as an expression, much like pwned by n00bshop, except with less emphasis on the winner being neophyte-esque.