It down to many things inculding; ping/ cpu speed/ server cpu speed/ packet quality/ isp congestion.
If the game server is overloaded(too many clients/stuff going on at the same time etc) people will begin to see server induced lag.
Server lag can be caused by lack of bandwidth or a slow cpu, wont matter if you have a ping of 5ms if the server cant send new data that fast.
The same can be said for the client pc, but its easyer to see.
A low frame rate can indicate lag on a client, lowering the framelimiter will alow the cpu more time to do other things.
If your pc is running slow, then your car will sink further into objects before anything happens. Speed is also a factor, the faster you go the faster your cpu needs to run in order to calculate the cars positon.
lfs uses ( i think) a physics based collision system, and a force is placed on objects upon collision. Nothing stops them from moving through each other unlike the gt games. Which use a bounding box solid surface for collison. Evan then objects can still go through each other when the framerate drops very low. (like 5fps)
Too very overlapped objects can end up placing their forces in the wrong direction, which is why thay can take off evan offline.
Pridiction errors online will cause a larger than normal force to be transmitted before you get the next update. So you start to fly, while the other person drives on as if nothing as happend.
the ping time you see will only be the minimum time for data travel, its not the full story.
you need a ping of 10ms to match lfs physics rate(100hz)
50 ms ping will give you 20 updates a second, not much is it?
When everything is working well, lfs has proven to be very good at collision/multiplayer.