Why does my minecraft server lag?

I have a minecraft server running through Hamachi. I play with my friends from time to time and recently we just started a new world that spawned us to a Jungle Biome. Ever since the whole game is laggy. Everytime i would break a block it would stay for 10 seconds then finally break.

There are two main factors of a minecraft server's capacity and power. First, the amount of memory you have allocated to the server, and second, the quality of your internet. If you have broadband and your only playing with a few people, you should be fine on the internet part of that. So that leaves the Random Access Memory you have allocated to the server.

When you start up a minecraft server without setting up any of the settings or running the server with a fancy batch file, the default RAM allocated is somewhere in the hundred megabyte range. To have a non-laggy server you'll want at least one gigabyte, but more is better. (My god server runs on more than 20.)
Make sure that you're not using more RAM than your computer has.

Now, how to do that:

You have to run the server file with a set of parameters that are different from the default (you want to use more RAM). So, you have to use a batch file, or.bat, to run the server. (I'm not sure if this is required, but the batch file needs to be in the same folder or level as the server.jar. I haven't tried running a server like this with a.exe.)

There are heaps of tutorials on the internet/youtube/minecraft wiki that will tell you how to make this batch file. And just as a tip, you should use a bukkit server. They are frankly much better.

Yup, Red4S pretty much got it…