I have been dealing with lag nearly every game recently. I learned about how Lag Compensation is built into the multi-player service. The Lag slows down players with fast internet connections so that slower connected gamers can still be competitive. The Lag levels the playing field by slowing down and delaying the visual gameplay of players with the fastest connections in the lobby. Since slower connected players cannot be sped up the only solution they came up with was to slightly delay the game play signal for fast connected players. This creates issues because slow connections received the benefit of seeing real time game play while faster connection see significant delays and therefore differences between what they see and whats actually happening.
This Lag results in the slower connected players being given real time gameplay while faster connectors are at a significant disadvantage while player up to a second or more behind. The Lag is based up the connection speed of the players in the lobby and MW3 attempts to place players with similar connection speeds into the same lobby but ultimately mismatches occur often and with frustrating consequences. Faster connected players are can attest to putting entire clips of bullets in to enemies only to fall over and die because what they are seeing on their screen is not what is really happening.
In order to combat being lag compensated we recently purchased a router with a Quality of Service (QoS) feature. This allows us to turn down our uplink speed from 25Mbps to 500 Kbps. That is over 99% slower. At this throttled connection speed our gameplay is rarely Lagged and we receive real time gameplay. This allows us to be on an even playing field with slower connected players. It also eliminates the frustration that comes with lag.
Therefore if you wish to eliminate most if not all the lag in your game then look to see if your router has QoS or consider purchasing a router to handle your connection to your game console and experiment with the QoS settings until you find a setting that eliminates lag from your game. In our experiments some games worked best at 250Kbps while others required 750Kbps. Another added benefit is that sometimes you play against players that are lagged and they have virtually no chance in killing you.