From what i hear UE3 has some funky things in it that make it looks like really good graphics when its not good graphics... but seeing as graphics is what it looks like they are good graphics... i just confused myself..
It uses some funky technology to do with super-imposing high-poly models onto low-poly models to make them look amazingly detailed, kinda like having an extremely dynamic texture on the model so although the graphics look amazing the models (and therefore the information needing to be sent to and from the server) are still fairly basic. Along with some crazy networking system they have got going (mentioned in the E3 video if i remember correctly) i doubt there will be much lag if any at all... What would be the point in designing a game that did nothing but lag all the time, the designers know what their limitations are, i would hope they would work with them
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