I've always been of the opinion that the two are actually 2 different things, but I've seen them used seemingly interchangably so I wanted to clear it up. Feel free to let me know if I'm wrong (not that I have to ask for that) 
To me:
Latency = Basically, what happens Downtown. It seems like everything is running normally but then enemies pop out of nowhere and when you try to take any sort of action (use a bench, loot a body, engage interlock, etc.) it takes several seconds for your character to actually do it.
Lag = Basically, choppiness and unsmooth gameplay. When running by Mara Central your frame rate drops, you may experience rubberbanding, characters (including yours) seem to warp around, etc.
Also, what does the meter in the bottom right corner actually measure? I've experienced problems with lag (as described above) when the meter is both full and near empty, and I've experienced problems with latency (again, as above) only when the meter is full.
