Host Advantage (Online Games)

I have just recently started playing Gears of War on the 360. I only really play games online and the game is amazeing. All the time I hear the losing party complaigning about how the host of a match has an unfair advantage. To me it just does not seem plausable. Some guy tried to argue with me that the host, hosted the entire game off of his xbox. From what I understand Microsoft and specifically Epic the makers of Gears of War has their own servers that host the matches. The "host" is just the user that controls the options of the game. If someone knows more about this maybe they can shed some light on the situation. I mean if hosts really had such a great advantage, would online games really prosper. And wouldn't all games be laggy cuz no one in the world has that great of a connection to host 7 players on their connection alone. To me it just seems like a cop out for losing.