Lol, Azrael- however did you guess those names? ;P
A lag test is where everyone gathers on the same spot of a map and tests abilities- mainly mute and smoke. One at a time, each player will pretty much call out- 3,2,1- smoke (or mute) and drop their ability. The idea is to see if it A) drops within a reasonable time frame, B) doesn't affect anyone for an unusually long time. It's also a good idea to run around a bit and look for general discrepancies in the way people are moving. Really bad lag is pretty obvious.