Hi there,
To answer your question in the title - response time and input lag are two different things.
Response time is the time it takes for the pixels on an panel to change from one colour to another (with the longest time being from white to black). Having a fast response time means that the you don't see much ghosting (a trail of pixels still changing colour) when there is a lot of motion (ie playing fast-paced games). TN type panels (especially ones used in 120Hz monitors) have the best response times - hence why they are recommended if you do a lot of fast-paced gaming. IPS panels tend to have slower response times since the pixels are made differently. This means that these panels tend to have more ghosting than TN panels when there is a lot of motion (though whether this is a problem is really down to the individual).
Input lag is the delay between your graphics card sending out the image and your monitor displaying it. Ideally you want as little input lag as possible if you are playing fast paced games (for example on an FPS game you line up a shot and press the trigger - you want the image you are seeing to be as current as possible so you don't miss), though up to 16ms is generally considered OK for gaming.
As for which to get, may I ask what you mainly use your PC for and if you do a lot of gaming, what type of games do you mainly play?
One option (if you have enough funds to hand) is to order both a 120Hz monitor and a 27in IPS monitor and test them both out on your system. Then when you have decided which you like the best you send the other one back under DSR (as that basically what it is for - to test out items as you would in-person).