This problem was first described in Farmer and Morningstar's "The Lessons of Lucasfilms' Habitat" (1990), which was a MMORPG running on Commodore 64 machines over 300 baud dial-up modems. They referred to this problem as "surreal time".

Back then, they had latencies of 100ms to 5000ms. The original article here says they can get latencies of 200ms from 99% of XBox connections. Not much progress in latency in 25 years. I can understand the LAN party nostalgia.