Broadly, a small or immature person (from The Wizard of Oz film). In gaming, it is a derogatory term which can suggest various behaviors considered immature, such as Power Gaming or Gamism or Hard Core play.

It can also refer to a style of play in which the ultimate ideal (thankfully, never actually achieved) of the participant is to dominate the System, that is, to be in control of the entire game. Disfunctional in gamemasters, this style of play is downright pathological in players.

References:

• The Munchkin's Guide to Power Gaming(approve sites)