I am sure this is not the only solution - but I can verify that this one works as we have all dreamed about. Real time jams - ability to record your sessions, share tab and lyric sheets, etc.
Nice thing about this service is it won't let you sign on if your audio isn't up to snuff (i.e. too much latency).http://www.jamkazam.com
I have used it to jam with people up to 2000km (~1200 miles). Users are ranked on latency so you have a good idea of what to expect when joining a session.