Calvin: [writing] Yakka foob mog. Grug pubbawup zink wattoom gazork. Chumble spuzz. [aside] I love loopholes.
Someone — typically but not always a Rules Lawyer — does something outrageous by finding a loophole in the rules, which were too narrowly written to consider such possibilities. Loophole Abuse is a form of Refuge in Audacity — which still allows the agent to claim they were following the rules.
Sometimes the loophole doesn't really exist, but the competitor makes everyone think it does. Occasionally, the loopholes were planted to enable Loophole Abuse.
In games, this may often be the result of some kind of oversight by the creators. A programming oversight can cause someone to do something they did not intend, such as killing a mob intended to be invincible.
In Real Life, this is more difficult for two simple reasons: First, loopholes are quickly closed once discovered, sometimes by an Obvious Rule Patch. Second, many systems have Rule Zero: some designated referee, judge, or authority figure has the absolute final word and can simply throw the argument out wholesale, usually by claiming that the "spirit" of the rule never intended to allow what the "letter" of it seems to say. On the other hand, some "loopholes" were actually exceptions put in the rule for a reason and as such are (or have become) part of the rule.
Also note that before you add an example here (especially under Real Life), loopholes are different than exemptions and provisions. These two are intentional exceptions to simplified version of a law. For example if a government taxes pools and a Pool manufacturer starts manufacturing large hot tubs to get around it, that's a loophole. If that same government decides they don't want to tax hot tubs, they will add a provision that says hot tubs are not pools. The former pool manufacturer is now using a provision to manufacturer hot tubs and is completely following the intention of rules but this may not be readily obvious to an outside observer.
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