I wrote about lag and the myths regarding ARC a lot of times in the past, and often referred to Gwyneth Llewelyn's one year old article on the issue. Today, Gwyneth has made an update to the article. Read "Anatomy of Lag" as a guest post on Ana Lutetia's blog.
Personally, I want to once again point out that the introduction of the "Avatar Rendering Cost" display was one of the worst things Linden Lab ever did. The ARC display has a certain informational character, however the (completely arbitrary) red/yellow/green tinting, and the way it was publicized turned it quickly into a tool for discriminating fellow residents. The ARC display does not tell ANYTHING about lag, not even anything about the capacity of the sim, but SOLELY about your own computer. However, seeing a red ARC number for a fellow resident makes some people... well... see red, and makes them feel entitled to criticize and even insult.
Would I be cynic or indulge in conspiracy theories, I would say the ARC readings and especially the color coding was made on purpose to distract from the real issues behind the scenes. But I don't believe that, I believe it was simply not thought through enough, and nobody estimated the sociological consequences a public discriminating feature would have.
More than ever I am convinced that Linden Lab would be well advised to get a sociologist into their team and run decisions by them and ask for advice.
Anyways, if you believe in ARC, read Gwyneth's article. And if you want tricks to reduce lag, read it too.