It's pretty bad right now. Not as bad as Vanilla launch, but bad enough that you can empty half a magazine on a guy and he'll walk away with only a few scratches at best. I remember coming up on a guy and dumping a good 2-4 seconds worth of flamethrower on his ass, only to rubber band three feet back and die to his PPSh fire without him taking a scratch even when hit markers were clearly "piping" away.
Running feels like you've got 80lbs weights strapped to your feet.
hopefully it will get better in time. Fantastic game so far the sound effects for weapons is orgasmic, and I love the intros for each map as well as the 60's soundtracks, but the lag makes it frustratingly unplayable. Unless you're sniping, (which you'll end up losing a lot of headshots due to the lag) you really shouldn't try playing it any time soon, at least on PS3