First, this is a question not only about network lag, but delay from wireless controllers and delay to TVs/Monitors. For a fast-paced action game, how do you compensate for these things? Has anyone come up with a reusable way to do this? If so, I haven't seen one. I'd like to see a game framework that includes this out of the box.
If there is no previous examples available, how would one implement this into an Update(float deltaTime) loop? Would it be possible to disguise or hide lag?