Flash Lag Effect
The flash lag effect is an illusion that demonstrates the perceptual difficulty in accurately detecting the position of an object at the time of another event. You should find that you generally estimate the position of the blue circle, ahead of its actual position at the time the red circle flashes (although this can be compensated for with practice). If you are a benign skeptic (and I hope you are), you might want to film the screen as you do the task (a 30fps digital camera movie will do) to verify the real position of the blue circle at the time of the flash is indeed at the red line.
In contrast to many illusions, this one may have catastrophic real-world consequences, and indeed affect the fate of entire nations. I'm referring to soccer, of course. It is estimated that FIFA assistant referees incorrectly call offsides 24% of the time. This error has been proposed to be caused by the the visual system's tendency to perceive an object (in the offside call case: the moving and most forward receiver) at the time of another event (in this case the pass), ahead of it's true position1,2.
The flash-lag effect also is one of many examples showing that our notion of simultaneous events is highly subjective and dependent on context. For example, in many situations, such as an outdoor concert hall, what we hear can be considerably delayed in relation to what we see (because sound travels approximately a million times slower than light). Yet we feel that the sound and sight of the cymbals clashing are simultaneous.
1Baldo MV, Ranvaud RD, Morya E (2002) Flag errors in soccer games: the flash-lag effect brought to real life. Perception 31:1205-1210.
2Gilis B, Helsen W, Catteeuw P, Wagemans J (2008) Offside decisions by expert assistant referees in association football: Perception and recall of spatial positions in complex dynamic events. J Exp Psychol Appl 14:21-35.