There is always the distance problem. This is why games like Warcraft III have dedicated regions for different geographical locations - to minimize latencies.
Until the entire Internet infrastructure changes, this problem will not go away anytime soon. The way bandwidth is distributed around the globe, coupled with the vast distances the packets have to travel, you will always encounter lag to some degree.
I have a buddy that lives about one km from me, and when we both play online, say, UT2004, we get somewhere around 40-60ms pings, which is "good enough". We both use the same ISP, so no wonder.
With my brother in law, we are lucky if we can get pings down to sub-300ms levels. When we actually get under 200ms, it's mutually deemed "good enough" to play vs. But this geographical location issue may well persist even if we get fiber optic and 100mb connections, simply due to the vast distances involved.
The other issue is the maxim that your connection is as fast as the slowest link. You may have 6mb broadband, but if you are trying to connect to someone who sports a 512kb connection, well...
Sub-20ms pings between, say, North America and Asia would be a godsend, but I don't see that happening anytime soon.
