Lag switching is usually much easier to see as opposed to just bad Internet. Lag switchers will usually lag out right when they're about to lose a fight, while people with bad Internet are just all over the place.
Let's take Dark Souls, for example. I've had matches against people that were rubber banding the entire fight, and I've seen them glitch out in several spots.
Lag switchers, by comparison, are much easier to see. They have fairly constant Internet, and not anything too bad is happening. Then suddenly, they'll stand perfectly still. Next thing I know, I'm being back stabbed, and then everything goes back to normal.
Lag switchers don't lag out at inconvenient times for them, either. I've had matches against people that lose connection midway through a really good fight, where it is very even. I've seen people in TF2 freeze in midair because their connection was so bad. It is fairly easy to see if you pay attention, and you can also check their connection in many games. If they have really good connection yet are lagging a lot, it is potentially a lag switcher.
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So for Destiny... if they have a constant Green bar for connection... but they lag out everywhere... it's a switch?
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That is the most likely case, yes. There may be the rare case where suddenly they get extremely bad connection, but in that case, they usually end up timing out or doing very poorly for a while, with visibly bad connection for a time.
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So do you think it's fair to report EVERYONE that has a bad connection as cheating?
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No, it is not fair at all, which is why I tried to make my post more about telling the difference between lag switching and simply bad connection. Not everyone you run across is trying to cheat, after all. I'd say it is only fair to report for that if it is almost certain from their behavior that they are lag switching.