Sever lag is dependant on how many players are on the server and how many are in a single area. It will be cleared up when everyone goes to bed.
Area based "lag" is (excluding a few other things that can cause it) a result of your PC or video card and will be cleared up in most cases if you upgrade your hardware.
The other things that can add to area based lag are 1) the area being very large (like point harbour) 2) tons of NPCs or PCs in the area.
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Steps to reduce area based "lag":
1) Turn off shiny water! - This setting is generally more trouble than it's worth and can even cause repeated crashes upon entering a certain area.
2) Turn down your video settings - Specifically grass, creature wind on grass, environment shadows and # of shadow casting lights.
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Settings that make stuff look better but have little effect on "lag" (might as well keep these at best)
1) Texture quality - The only reason to set this down from high is if you have a very old or unsupported video card and stuff looks funny. In that case I reccomend setting it to low. The other reason to turn it down is if you experience really long area load waits. Setting textures lower will speed area load time (though not in a huge way.)
2) Resolution - This actually behaves differently on different machines/configurations. On some machines I notice a vast performance increase at the native resolution of the monitor (and if I lower the resolution performance actually goes down.) On other machines I see the logical gain in performance as I decrease resolution, so you'll need to play with this one, but I recomend trying the shadows/shiny water things first.
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Recomendation for everyone:
Make sure your video card drivers are current. Sometimes this can yield a dramatic increase in performance.
