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http://www.minecraftforum.net/viewtopic.php?f=1012&t=68128
Making your server lag less (by tuning Java settings)
If you are running the Minecraft server on a multi-processor or multi-core system, there are some things you can do with Java's garbage collector settings to help speed things up (perhaps significantly in some cases). For example, lag spikes that were occurring on my server disappeared after I made these adjustments. ricin in particular gave me a heads up about trying a different GC.
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