If you are using photon which is a great way to go (my experiance) than this is a great tutorial that shows you exactly how to smooth the movement and describes exactly why this is happening and teaches a bit about sever networking.
http://www.youtube.com/watch?v=oZ7TQjWhtEw&feature=c4-overview&list=UUPXOQq7PWh5OdCwEO60Y8jQ
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