From SmashWiki, the Super Smash Bros. wiki
Luigi takes damage, because he is out of view.
is the damage that a character receives when they are out of the camera's boundaries. The damage is applied at a rate of 1% per second to prevent players from simply hiding near the
blast zones of a stage. Once a character reaches 150%, however, damage stops. Hoop damage is present in both
Melee and
Brawl. It was never mentioned on the
Smash Bros. DOJO!!, until April 14, 2008. Hoop damage occurs in every mode, except for
Training Mode.
In SSBM, the "hoop" was called the Magnifying Glass, as evidenced by the Lost In Space bonus.
