I believe that's the joke. I wish latency was getting better but every new thing that comes along moves the acceptance further away. Many don't even notice 500 ms delay from click to something actually happening. On my Atari I often had the feeling something started happening before the mouse button was all the way down.
I can't believe that people wouldn't notice 500ms of latency when playing a game. Even 150-200ms is very noticeable.
Some LCD TVs alone can add 40-60ms of latency, and software can add another couple of frames. Often 30hz frames, too...
Which kind of sucks if you grew up on CRTs and arcade games that often managed much lower latency.
But I guess it means that game streaming really could offer a console-like experience if as much non-network latency as possible was eliminated...