This is something that is used only on the internet or in other electronic messages (like text messages on a phone). It would not typically be said during in-person conversation. What it originally meant was that something is so funny that it actually caused the person to laugh. Over time, it has become used so often that it has become just an acknowledgement of humor (or sometimes an expression of ridicule) without literally meaning a real-life laugh.

lol = hahahahaha = hihihihihihhii = hehehehehe :D