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What is a GPU?

Graphics Processing Unit

It's not part of the actual processor, but it works in tandem with the processor and both are parts of the chipset. It's basically a specialized processor to handle video and graphics. Some phones don't have a dedicated GPU, and have to use the normal processor for these things. Since a normal processor isn't specialized for graphics, and can't handle that workload along with it's other duties, those phones can't really do 3D applications and certain visual effects as well.
 
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Yet the homescreens lag...

Do you have live wallpapers on?

This was a complaint of Droid owners when the phone came out too. We couldn't figure out why the transitions were so choppy when the phone was clearly more powerful than previous models which had nice smooth transitions.

Turns out it's most likely due to the operating system and not the hardware. 2.0/2.1 are seemingly not as smooth in transitions as their older cousins. Not really your phone's fault.
 
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