How network games work...

Highly handy comment from PlayerController.uc in the Unreal Development Kit: Multiplayer net games 101..

/*
========================================================================
Here's how player movement prediction, replication and correction works in network games:

Every tick, the PlayerTick() function is called.  It calls the PlayerMove() function (which is implemented
in various states).  PlayerMove() figures out the acceleration and rotation, and then calls ProcessMove()
(for single player or listen servers), or ReplicateMove() (if its a network client).

ReplicateMove() saves the move (in the PendingMove list), calls ProcessMove(), and then replicates the move
to the server by calling the replicated function ServerMove() - passing the movement parameters, the client's
resultant position, and a timestamp.

ServerMove() is executed on the server.  It decodes the movement parameters and causes the appropriate movement
to occur.  It then looks at the resulting position and if enough time has passed since the last response, or the
position error is significant enough, the server calls ClientAdjustPosition(), a replicated function.

ClientAdjustPosition() is executed on the client.  The client sets its position to the servers version of position,
and sets the bUpdatePosition flag to true.

When PlayerTick() is called on the client again, if bUpdatePosition is true, the client will call
ClientUpdatePosition() before calling PlayerMove().  ClientUpdatePosition() replays all the moves in the pending
move list which occured after the timestamp of the move the server was adjusting.
*/