"Lag" is not framerate drop, SMS.
Latency, or lag, is when the game responds slowly (For instance, press the button and have it happen 2 seconds later). This is caused by the internet connection of the host not being able to handle the number of people in the game, or your internet connection is not capable of dealing with the amount of people in the game.
Framerate drop is when the image starts getting choppy, sometimes to the point of making the game look like a slide show. This is caused by your computer not being powerful enough to display the stuff onscreen. If this happens to you a lot, try lowering your resolution.
Occasionally, there will be a lag spike and the game will freeze while the game figures it out. This is a combination of both and is normally caused when a player loses connection to the game.