(1) As originally used by Nutation (who first coined it), w00t is a happy sound, like "waa hoo!" or "yippee!"
(2) When I started using w00t, I mistakenly thought it meant "whoops", so that's how I still use it. When I later added a transnomatapoeia definition to it, I described it as the imaginary sound made by your eyebrows suddenly being raised.
Nowadays, w00t is used both ways. In both cases, it is not set off by asterisks and is spelled distinctively with two zeroes instead of two Os. It sounds similar to the Macintosh "droplet" system sound.