Most people think this would have to be interpreted as letters which mean laughing out loud, but actually its a guy who raises his hands into the air.
derp: hey herp, im lol'ing
herp: why are you laughing?
derp: no I am raising my hands into the air
herp: Oh yes I am a complete faggot
derp: of course you are
herp: This has nothing to do with an example has it?
derp: What the fuck are you talking about? lol