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Types Of Lag

Full System Lag Explained
From Start To Finish.

THE FORMULA: 
server + internet quality + lan/nic + hardware + bios/operating system + frametimes + monitor + you + peripherals + system + lan/nic + internet + server = lag

Seems like a lot right? Well it is. Considering each components average, you're looking at roughly half a second.

Overview 

    There is all types of LAG in any system, computer, console, even cell phones. Below is a list and short description of each type of lag. Granted each item may lag only a few milliseconds, but when they ALL LAG it equals a higher total amount of latency. So by eliminating most of the lag from each of these areas creates a VERY fine tuned system.

Monitor

Monitor lag can only be seen by some, but there is a delay from when an object actually moves inside your system and when it actually moves on the screen. So you end up shooting someone thats a half-step off from there actual position(more like a few inches nowadays,depends on the game). This can be related to low refresh rates as well. 60hz I can notice missed shots, 120hz I can never tell and its usually something else lagging. Not only that but having a low refresh rate hurts your mouse movement and in extreme circumstances makes you miss keypresses!

Mouse 

    Mouse lag is mainly two things. When you click and when it actually reaches your system, this can be adjusted by raising usb polling rates or mhz (250mhz, 500, 1000). The other is G Force lag, how fast can you move your mouse and does it keep up. Its called the McFly test. You put your mouse in a location and remember its EXACT spot by butting it up against something while aiming at something ingame, move it around all crazy and go back to that same aim point, is the mouse in the same position?

Keyboard 

    Keyboards are effected in almost the same way as mice but not so important in the polling rate but the keypress time and accuracy. Keyboards are broken into two types. Membranes which have mushy rubber bumpers under the keys that make contact below when pressed. The second is Mechanical, which use an actual mechanical actuation and are extremely accurate and responsive, over double efficiency for gaming. But, some mechanical keyboards add a bounce delay of at most 5ms. Read more about key bouncing in the Terminology section.

Network 

    Network lag can be felt in a few ways, visually on screen being the most common. Some even choke your system by creating micro-stuttering because its waiting for data. Some game engines even restrict your movements because of the way the game rely's on network functionality. The quality of the network connection can even effect your hit registration, so if your network connection were a graph that looked like a heartbeat monitor, good luck hitting anything. FPS games that rely on servers to connect everyone rely on alot of variables to maintain smoothness. Call of Duty's Modern Warfare 2 used a Peer 2 Peer system with no servers at all and has been by far the most successful online gameplay I've encountered.

Cpu, Gpu, Ram, & Motherboard Chipset 

    These you almost have no control over because it mainly depends on what you buy and if you overclock them. But the main key is SPEED SPEED SPEED. The faster everything gets from A to B the less lag there will be. The way the system manages each component will affect lag in this area most.