How does PSN "region-free" work?

It is clear for everybody that PSN is not region locked, but many people including me have seen that online conditions are different whether you play with a game from your region or not.

I’m from Europe, and as far as I can tell :

  • Soul Calibur IV, whose online is already crappy, is even crappier with an Asia or US of the game

  • Street Fighter IV Asia has more delay than Street Fighter IV PAL

  • Tekken 5 : DR Online is “laggier” if you downloaded the US version instead of the European one

So may anyone explain me how it works ? But despite those problems, I have never had any problem for playing anyone from any region, only the online conditions are altered.

The most common causes would be down to the following

  1. If a company wanted to region a network they would filter by IP, believe it or not this gives your location away
  2. If a particular company invests more in infastructure in a certain geographical area. For an example to one of your questions above, it could be that the best internet fat pipes and servers are installed in Europe.
  3. Europeans hate the game and there are not many people playing making the game lag less for those on line that do play.