Reducing latency isn't about how noticeable it is. Latency can be completely impossible to detect for you but still hurt you.
Input lag is the time between providing some input, such as clicking with your mouse, to getting feedback of this event on the screen. As the clicking will be prompted by things happening on the screen, input lag acts as a command delay to everything that is done. The most interesting feature of latency is that all latency is additive. It doesn't matter how fast or slow each part in the system is, none of them can hide latency for one another. Or, even if the game simulation adds 150ms and your stupid wireless mouse adds 15ms, the 2 ms added by the screen still matter just as much.
The second mental leap is that the human controlling the system can also be considered to be just another part in the pipeline adding latency. Consider a twitch shooter, where two players suddenly appear on each other's screens. Who wins depends on who first detects the other guy, successfully aims at him, and pulls the trigger. In essence, it's a contest between the total latency (simulation/cpu + gpu + screen + person + mouse + simulation) of one player against the other player. Since all top tier human players have latencies really close to one another, even minute differences, 2 ms here or there, produce real detectable effects.
Pixel persistence is not about image quality and cannot be mitigated by anything, except turning off the backlight at an interval in sync with the frame rate you're updating the image. This is how CRTs work, and that's why they had no ghosting effects. The 3D graphics driver hack I mentioned does exactly that for 3D enabled LCD monitors.
edit: Or in other words - it depends on how often the reaction of the opponents is with the 4ms difference. That certainly depends on the game and the players.
Furthermore, if you watch pro matches, you'll quickly realize their skill has nothing to do with having the fastest reaction time. Once you get to a certain skill level, it all comes down to game knowledge. Having a consistent 4ms advantage is absolutely negligible.
I definitely agree that small latencies can be noticed, even latencies approaching 5ms (but not 5ms itself--I've seen monitor tests done that showed this).
You did not understand the point of my post. The quality that matters is total latency. How long a human takes to react is completely irrelevant to what level of latency has an effect. Whether average human reaction time was 1ms or 1s doesn't matter. All that matters is that your loop is shorter than his, and your reaction time is very near his, so any advantage counts.
> the 200ms reaction time + human variation + variation in network latency + discreet server time, will absolutely dominate the effects.
Server tick time is the same for everyone. Top level gaming tourneys are held in lans, where the players typically make sure that the network latency from their machine to the server is not any greater than from anyone else. However, none of that matters to the question at hand.
Assume that total latency of the system, including the player, can be approximated by:
Human_reaction_time + network_lag + processing_lag + display_lag
and assume all are normally distributed random around some base value, except display lag, and you have:
(midpoint, standard deviation)
rand(200,20) + rand(20,5) + rand(16,2) + 15
while I have:
rand(200,20) + rand(20,5) + rand(16,2) + 5
The total latency is utterly dominated by the human processing time. Yet if we model this statistically, and assume that lower latency wins, the one with the faster screen wins 63% of time. That's enough of an edge that people pay money for it.
And remember, we're considering 1ms vs 5ms, so the difference would be 4ms in this case. I would like to see what percentage an advantage someone has in this setup. Even 63% isn't anything significant considering skill comes down to game knowledge rather than absolute reaction time. People will pay for smaller/bigger numbers, sure. But that doesn't mean there is anything practically significant about it.