So how do commercial games do real-time networked physics? Or do they not?
I want to build a game using networked physics over the internet. Obviously latency is probably going to be quite high and inconsistent. I suppose that I can get around the lag issue by changing the way the game is played, make it more turn based rather than completely real-time. I'm sure that if I'm clever with the game design I can get around it

I would like to research this problem a bit more though because it would be awesome to have proper real-time networked physics

If you have any ideas about how to make it a reality, I'll gladly give it a go.