In short, this lets you use PS2 stuff on your 360 with no lag whatsoever, but a wired 360 controller is necessary.
In detail:
I originally went ahead and purchased an XFPS when they were first on the scene in 2007, not for the FPS side of things but so I could use my PS2 Saturn pads with them. It had horrendous amounts of lag, and this wasn't ms, it was actually dropping multiple frames. Totally unplayable. So I ended up selling it and went without for awhile, a long while actually; the Hori 360 pad didn't meet my satisfaction either as the analogue sticks were too loose and the dpad itself was very average.
Then the Fightpad came on the scene earlier this year, which is fairly solid, but it's just not the same as using a Saturn pad which I've grown accustomed to. So I saw this, and I noticed that laugh of SRK was claiming that there's no noticable lag with these adapters. Laugh isn't the kind of person who would randomly claim this without thoroughly testing and inspection himself. He also managed to create a PS2 to DIN13 adapter - by hand - for myself and myself alone.
So I went ahead and ordered one of these from him, which was $23 USD + $7 (Air), a grand total of $30 for the converter. The converter itself looks something like this:

The USB cord is actually really short. It's about a foot long. There's an independent 360 guide button on the right and a USB slot for a wired 360 controller (required) on the left. The PS2 port is on the front, and on the top is a switch which lets you use racing wheels. So I went ahead and played R-Type Dimensions and Rez with this adapter and noticed that there's absolutely no lag (from my interpretation of movement) using a PS2 Saturn pad.
The only problem I've found is that you can't configure the buttons, which means that games like R-Type Dimensions that come with preset buttons have to be used in that way. In this case, releasing the pod in R-Type 1 is Z, and shooting is B. Rez has a configuration for buttons, though. The button layout is also rather weird, if you're going to use a PS2 Saturn pad with this:
Saturn - 360
b is a
y is b
z is x
c is y
But it's fine with games that you can configure them with, like Daioujou BLEX for example. Anyway, I'd highly recommend this adapter because it's 1) way below the price of the inferior XFPS and 2) has little to no lag whatsoever.
[Edit 19/4/11: Also see my Controller Converter Pro review and comparison, which doesn't require any wired 360 controller to use.]