When trying to minimize lag, the first thing to do is to determine what kind of lag you are experimenting. Basically, there are 3 categories, each with their own solutions. Linden has incorporated some handy features in their viewers to determine lag.
Firstly, there's a small lag-meter accessible via the Help menu (in SL viewers). It shows you the 3 lag-categories:
The little balls in front of each category tells you, according to their color, their state (Green = OK, Yellow = Some Problems, Red = Bad)
Here's a breakdown of those 3 categories:
basically, your PC/MAC and your personal settings in your SL viewer (Preferences window). If your graphic settings are too high and/or your computer's graphic card is too slow, Client would either be yellow or red in the lag-meter.
refers to your specific internet connection speed (as perceived by the lag-meter). If this section is either yellow or red your general connection is either too slow, you possibly have file-sharing programs (or other downloads) running at same time, a bad wi-fi connection/more people using same connection at your location, etc.
refers to the server run by Linden Labs. Each sim is on a server (usually more than 1 sim/region per server). Servers do not have endless resources and in certain circumstances (ie, many people in sim at same time; depends a bit on type of server but for mainland sims this usually is around 40 people) can cause annoying lag (ie, 'jerky' movements, freezes, chatlag).
SL's Support Center offers detailed help on how to avoid lag, change your settings/connection via the Lag Meter topic.
Secondly, there's the Statistics Bar in the View Menu and which gives more detailed info about connection, ping, time-dilation, people in sim (main agents), people outside sim but using some of sim's resources (child agents), scripts in sim, script time, etc.
Note how this statistics bar is much more detailed and technical. It can be usefull to further filter out causes of lag after having used the lag-meter described above.
To recap, first find out the cause or causes of lag (it can be more than 1 category). Then tweak your system/settings via the link given above.