the lag i'm talking about is when you go into a heavily populated area in an mmo. What exactly causes that lag? What i mean is, what hardware(s) are responsible for that lag?

I ask this question b/c i personally have a good computer and don't understand why when im playing a game like war or immortals and go to the main town center (which, granted, has a lot of people) and get hit with lag (not an excruciating amount).

oh and in case your wondering, my specs:
i7-960 (3.2-3.46GHz) 8MB L3 Cache, Ram 6GB - DDR3 1333MHz Memory, dual HD6990M's (4096MB Total) GDDR5 DX11

i thought ram was responsible for controling that lag, but my comp is only using 4 gigs out of 6 for me when i'm actually in that town center (not to mention everything else on my computer is running full speed...just a sluggish game in my window)