I have been doing well since moving up to $0.50/1 recently however just had my most frustrating session in a long while. There was a guy sitting who would be prepared to play $60-80 pots with top pair and med kicker and seemed completely fearless with pot sized bets on flop and turn if he smelt any fear in the oppponent. To start with it made for a juicy game however luck seemed in his favour and he soon busted two players who called him down lighter than they would a normal player and his huge $400 stack just ran over the table, I tried to fight back but he was catching cards and combined with his fearlessness made it extremely difficult to combat him.
he moved tables and i followed thinking his luck couldn't last but soon enough he was sat on $400 at the next table and realised his strategy was actually working as he was getting action on his big hands and bluffing off weaker opponents on their mediocre hands.

My question is how do we combat this type of maniac player, tighten up, 3 bet his raises, or just hope to catch some decent cards??

Observe his betting patterns and the hands he's playing to establish a range and some tendencies. Once you understand his range and his tendencies, think about when you are ahead of him and let him 2bet then come over the top. You will enormously frustrate him.

The other thing you can do is just get out of the way of a better player.

One problem I've had with the move from 50 to 100 NL is that 99% of the loose players at 50 NL are bad and maybe 15 or 20% of the loose players at 100 NL are good. I'm not sure about higher but 50 and 100 NL online is mostly populated with nits and a good LAG can really clean up. I've seen people with 60+ VPIP do very well.

I think the key is to very carefully observe the loose player. Are they LAG - like to raise most of the pots they enter pre/high AF post flop? Are they calling stations - like to limp pre/call down light post? If they're LAG what kind of pre-flop standards do they have (if any) and when do they bet post? There's a big difference between a guy who's 80/60 and a guy who's 80/15. And a guy with a 6 AF could be getting/giving lots of free cards because people are afraid of him. Does the guy c-bet nearly all the time he's the PFR or does he check a lot? Does he nearly always bet the turn if the flop was checked around? Another important factor is how he reacts to resistance - does he always call/4-bet pre if he's 3-bet or does he often fold? Does he often fold to a flop c/r?

I find the good LAGs very hard to play against but I think that's mostly because I get into such a rut playing nits. Raise pre, get one caller, c-bet nearly any flop and they fold. Rinse and repeat. Doesn't work well against LAGs. A good LAG is profitable in part because they give the illusion of action much more than they actually give action. I lose a lot of $$ against good LAGs with hands like: LAG raises pre, I 3-bet w/AK in position, LAG calls. I miss flop but c-bet and LAG calls. I miss turn but 2 barrel, LAG calls. River whiffs again LAG bets, I call, LAG shows middle pair.

Remember though that the LAGs ability to get action can work against them and their big wins often rely on lucky flops. One of my biggest pots ever was against a LAG when I had AKs vs JJ aipf for 150BB each. I likely would have folded pre given the action to any of the standard nits had they taken the same line.

A good option with a really aggressive LAG is to go limp and call down hands where you have a decent piece and he's keeping up the betting. Depending on the villain a decent piece could be mid pair/good kicker or better.

The keys to beating fearless lags are:
1) 3 bet him consistently with big hands, and not so much so with decent hands, meaning you should be folding silly hands like AT and AJ.
2) Stack off preflop with hands like AK and AQ if he goes into 3bet mode, when you're oop.
3) DO NOT get agitated by his aggressive shovehappiness
4) Flat his raises with position with hands like AK or AQ and when you do flop TPTK, let him bluff off his stack,
5) Do not call into his pots with suited connectors and such hands, even with position, because he's going to rarely stack off when you do flop something big,
6) You can set mine on him when you get the right price and when you do flop a set, let him hang himself by the nuts.

I think the most important one is 3, you cannot tilt because he is agg-re-essive.
Like MT said though, staying out of a players way who consistently has your number is +EV too.

I swear this guy sounds like every one I play against at UB,

Calling LAGGs with Small Pairs and Suited Connectors is the safest approach. Since your opponent is laying you the implied odds to call, and you always know what you're looking for with these hands, you'll easily get him to stack into a set, straight or maybe even a flush with his over aggressive play.

If he's the kind of LAGG that Donks pots and Bet Pots checked turns, then you need to either double barrel the turn 100% of the time or start check raising the flop. If you're behind him, 3Betting marginal hands could work, but if he's not responsive, then all you're doing is building the pot for a more aggressive player. If you're in front of him, limp in with AA, AK and maybe AQ, KQ and then let him raise over the top in order to call and trap him. I'm also fond of the limp re-raise, but whether or not it works is based on how fearless/stupid he is.

I disagree with that honestly. I don't think playing baby suited connectors and such against a super aggressive player is a good approach. If you think set mining is difficult, see how long it takes you to flop a real hand with 45dd. Also when you call into hands with these hands, and flop top pair, it's harder to fold to a LAG who you don't give respect to, and you are tempted to make hero call after hero call as he bloats the pot.

The best way to deal with laggy players and maniacs is to force them to make decisions. Calling preflop with crap like SCs is a losing strategy against these players.

Good stuff has been said already but a few more things

3-betting light
- avoid doing it OOP like the plague. Good LAGs know that their style of play tends to eventually cause people to try and out-aggro them with lighter hand ranges, meaning they make a ton of $ by picking you off with hands weaker than you'd expect. If you're going to occasionally multiple-barrel a LAG, position makes it a hell of a lot cheaper and really cuts down on the opportunities for the LAG to take the pot away from you on the river.
- polarize your 3-betting hand range. The LAG is obviously playing a wide-range and you want to constantly stick him in RIO situations while avoiding them yourself, meaning you cut out all of the medium hands you might 3-bet with like AJ/AT/KJ (like someone mentioned). 3bet LAGs with sweet starting hands or total garbage, and never something in between. Both the top and the bottom hand ranges are way easier to play postflop once you've built a big preflop pot. You need to throw in some 3bets with garbage occasionally because otherwise your 3-betting range becomes an open book to the LAG - not necessarily because he gets to see your garbage at showdown (obviously you shouldn't be going to showdown with them!) but because the frequency of your 3-betting will tip him off.

Suited Connectors & Other Spec Hands
- avoid small suited connectors - hit a flush with your 76s, watch the pot get huge and the LAG flip over 85s.
- i generally tend to agree with not playing them at all, but find that T9s, 97s, and 98s, in position is a decent way to go because you're putting the LAG in RIO situations more often than the other way around (since he's playing a wider range of nectars). if you flop a strong draw, always play it fast.
- Ax suited goes up in value IF you have position AND the discipline to fold it quickly postflop even after hitting an A. The reason is that if you flop a flush draw on a board without an A, quite often you have 12 outs to play it fast (since he has to fold better A highs pretty much all the time).

Lastly, it's ok to make small mistakes, i.e. folding marginal hands that could be winners but could also be easily beat. The key is trading your small mistakes for the LAG's big ones.

Against someone playing like a maniac, in most situations, 2nd pair is the nuts. The idea of playing Ax suited and folding when you flop top pair is stupid. Either fold it preflop or play top pair like the nuts against a guy playing 40% of the hands.