Everyone ignores the obvious and goes with the red herring.

It isn't that Lag creates damage from AoE attacks. It's that every aspect of the game is controlled by Mob AoE. From the level 10 instance to Titan HM. All battles on the map, all battles in dungeons revolve around the area attacks that all mobs use. It's the only thing the game uses to make anything happen. They aren't special. They are on every mob. It's overkill.