Or maybe "cuts in front of you" means you wanted to buy the stock at $50, but you didn't actually place the order until the last minute because you wanted to play a speed game (and lost).
Another is to flood the exchange with orders in a bid to create congestion and slow down other market participants who might intervene.
This is why HFT in fact causes higher transaction costs on market participants. It provides the perfect way to leech.
A) On every exchange that I know of, the only way that using tiny orders gives you any information advantage is that on certain exchanges fill information is processed faster than market updates. Nothing in that fill information would allow you to determine if there is a large price insensitive market participant in the market vs lots of small price sensitive participants.
B) Nearly every exchange out there allows large participants a variety of mechanisms to hide their order flow. The simplest is iceberg orders.
C) It is a feature, not a bug that prices change in the face of large order flow. Every market in the world, electronic or otherwise works on this basic assumption.
Finally, your example about spamming quotes to create congestion on matching engines is a problem that has already been resolved. The exchanges themselves had a very high incentive to fix this. Their solution was to introduce fill ratios and to fine folks aggressively for violating them. I don't know of any main line exchanges where quote spamming can provide a legitimate latency advantage still.
I'm not picking on one commenter here. Many HNers post substanceless one-liners. Please don't do that. Re-read what you've posted and, if it adds little of substance to the discussion, delete it. Fewer substanceless comments will mean a higher signal/noise ratio for all of us.
Edit: someone pointed out to me that kasey_junk is one of the few people who actually knows what they're talking about in this thread, meaning that he/she has contributed much more signal than noise. That's probably true! I don't have time to read all the threads, even the interesting ones—especially the interesting ones. I'm sure kasey_junk couldn't care less, but I've restored the karma that his/her account lost to downvotes here.
Keep in mind that HN is going through a period of experimentation while we figure out how to address some of the longstanding problems that PG never had time to take care of. We're going to get a lot of things wrong on our path to getting things right. We're also very interested in your feedback on these experiments, so don't think the feedback is one-way. The best channel for it is hn@ycombinator.com.