Actually I don't think this is a latency problem.
Latency is caused by a delay on midi instruments because of the amount of time it takes for the midi signal to trigger the vsti instrument.
In this case, it sounds like he's talking about a monitoring problem.

On Cubase there are several preferences settings depending on whether you are monitoring directly through your computer or using an outboard mixer.
Right now it sounds like he's got his preference on the wrong setting so he's hearing the monitored sound rather than the live one while he's in record mode. (sorta like using a 3 head cassette deck and hitting the Monitor button to hear what's on the tape compared to what's coming from the original source)