Latency

Latency is another name for the transfer delay on a data connection, e.g. between a server and a client.

This is quite important because if an important event occurs (e.g the server registers someone casting a spell) the news of that event have to travel to your PC, and your reaction to that event has got to travel back. The longer that takes, the less time remains for you react. If your round-trip latency ("ping", measuring the time a data packet needs to reach the other end and come back) is 250ms, a 1/4 second activated skill will have hit you before your reply even reaches the server.

Lag is not directly caused by the "speed" of your connection measured in bits/s (called "throughput"), but it is affected by how many "hops" (intermediate stations) there are on the connection, and how "clogged" these are (i.e. how long data packets have to wait before it's their turn to be sent), and even by how much data is collected into a single data packet (if your data waits for a larger data packet to fill up before it is sent, it has to wait longer = more latency).

Lag
When a player is suffering from lag it means his or her computer or internet connection is causing a delay in his or her awareness of what is going on in the game. This is normally caused when the data packets sent take longer than normal to reach the server and/or vice versa.

Lag can adversely affect game play in many ways, for example when a party is attacking a mob, a lagging player will see monsters in places they no longer occupy, reduce the time a person has to interrupt a skill, will hit monsters that have already died and react to conditions that no longer persist. E.g. Try to heal someone who is dead or remove a hex that is no longer there. In the eyes of the party, the player will be standing around, then running at a corpse, then casting a meaningless spell. In a very bad case of lag a player may not be able to move at all for a short amount of time.

Lag may also cause rubber banding whereby a player moves to a location then immediately appears back where he or she came from; this may occur multiple times before a player can walk properly again.

Heroes and Henchmen are not affected by lag, the server controls them even if you are lagged out.

Ping
Ping is a tool used to measure the transfer speed of client and server packets to each other. A packet is sent to the server and back. The time that this takes is measured in milliseconds. A lower ping is better; a ping of less than 200 will appear lag-free in Guild Wars.

Users can monitor their ping through the Performance Monitor by placing their cursor over the small round icon on the player's screen just above the bottom right corner.

Solutions

 * Check your connection for interference; if you have other hardware connected to the internet line they may be causing interference with the data.
 * Close all other internet-related programs on your computer to reduce lag (especially instant message programs, such as AIM).
 * Stop downloading/uploading other data on the internet connection.
 * If you have a wireless network, move closer to the router.
 * Occasionally, individual servers may have problems. If you experience severe lag only in a certain mission area, try starting that mission from an international district (note that if the server's IP range does not change this is unlikely to help, except in the case where that particular server is overloaded).
 * If the ISP gives you dynamic IPs and you have noticed that they can be from different ranges, try disconnecting from your ISP and reconnecting till you get an IP from a different range, sometimes a different IP range may be "closer" in network and latency terms to the Guild Wars servers.

In-game consequences
While playing with lag is no fun for anyone, certain professions suffer from bigger drawbacks than others:
 * Any melee class suffers from more rubber banding than ranged or caster classes, because they have to run around more.
 * Interrupters have an especially hard time, for obvious reasons.
 * Playing a monk can be difficult because you might not be able to save a person's life before they die.

External sources

 * Lag-Wikipedia