In video games, input lag is either the delay between the television or monitor receiving a signal and it being displayed on the screen (see display lag below), or the delay between pressing a button and seeing the game react.
The potential causes for "input lag"- according to the second definition- are described below (steps which have negligible contributions to the input lag have been omitted). Each step in the process increases "input lag", however the net result may be unnoticeable if the overall "input lag" is low enough.
Controller sends signal to console 
For wired controllers, this lag is negligible. For wireless controllers, opinions vary as to the effect of this lag. Some people claim to notice extra lag when using a wireless controller, while other people claim that the 4-8 milliseconds of lag is negligible.
Network lag (online gaming only) 
Since the game requires information on the location of other players, there is sometimes a delay as this information travels over the network. This occurs in games where the input signals are "held" for several frames (to allow time for the data to arrive at every player's console/PC) before being used to render the next frame. At 25 FPS, holding 4 frames adds 160 ms to the overall input lag.
Console/PC processes next frame 
A videogame console or PC will send out a new frame once it has finished performing the necessary calculations to create it. The rate at which this is achieved is measured with the frame rate. Using Gran Turismo 5 as an example, the maximum theoretical frame rate is 60 FPS (frames per second), which means the minimum theoretical input lag for the overall system is 17 ms (note: the maximum real world FPS in 3D mode is 40-50 FPS). In situations where processor load is high (e.g. many cars are on-screen on a wet track), this can drop to 30 FPS (16 FPS for 3D mode) which is equivalent to 32 ms.
Display lag 
This is the lag caused by the television (which is also called "input lag" by the first definition above). Image processing (such as upscaling, 100 Hz, motion smoothing, edge smoothing) takes time and therefore adds some degree of input lag. It is generally considered that input lag of a television below 30 ms is not noticeable, discussions on gaming forums tend to agree with this value. Once the frame has been processed, the final step is the pixel response time for the pixel to display the correct colour for the new frame.
Typical overall response times 
Testing has found that overall "input lag" (from controller input to display response) times of approximately 200 ms are distracting to the user. It also appears that (excluding the monitor/television display lag) 133 ms is an average response time and the most sensitive games (first person shooters and Guitar Hero) achieve response times of 67 ms (again, excluding display lag).