Depends on what you mean by lagging. It's of course not a Mac Pro but editing videos and photoshop files is quick. It takes a little longer to compress HD videos, but I just let the MBA run for a few hours to process the video, no big deal.
It definitely does the job.
Of course it "does the job". A PowerBook G4 could "do the job" most of the time (I've edited video on eMacs at school back in the day - terribly slow - but it worked!)
I have an Air, and love it, but if you're editing HD video, you could be done in a fraction of the time with any of the current MBP lineup compared to the MBA. 1/2 the time or less.
If you have the time to kill (do you really wanna waste a few hours every time you want to encode our output from Final Cut?) then by all means, but I would never suggest a MBA to someone who edits any decent amount of HD video.