There are a lot of sources of total latency in most games and systems that affect how long it takes between when you click a button and get a response. This means that there's often opportunities for optimizations that can remove entire frames of latency to make up for the additional network lag. It's not going to be enough for e-sports games but it can keep the experience from changing for many titles.
Just as an example of what I'm talking about, if you turn on the nVidia Reflex latency reduction feature along with the DLSS 3 AI Frame Generation, you get the same latency as with Reflex off but with much better smoothness. Of course if you're playing Overwatch you are chasing every millisecond of latency, but for most games it just needs to be low enough not to be noticeable.
Just as an example of what I'm talking about, if you turn on the nVidia Reflex latency reduction feature along with the DLSS 3 AI Frame Generation, you get the same latency as with Reflex off but with much better smoothness. Of course if you're playing Overwatch you are chasing every millisecond of latency, but for most games it just needs to be low enough not to be noticeable.