This question is being left open with a request for more detail, so I’ll try to fill in the gaps of Patrick Klug’s answer. He suggested, reasonably, that you transmit both the current position and the current velocity at each time point.
Since two position and two velocity measurements give a system of four equations, it enables us to solve for a system of four unknowns, namely a cubic spline (which has four coefficients, a, b, c and d). In order for this spline to be smooth, the first and second derivatives (velocity and acceleration) should be equal at the endpoints. There are two standard, equivalent ways of calculating this: Hermite splines (https://en.wikipedia.org/wiki/Cubic_Hermite_spline) and Bézier splines (http://mathfaculty.fullerton.edu/mathews/n2003/BezierCurveMod.html). For a two-dimensional problem such as this, I suggested separating variables and finding splines for both x and y based on the tangent data in the updates, which is called a clamped piecewise cubic Hermite spline. This has several advantages over the splines in the link above, such as cardinal splines, which do not take advantage of that information. The locations and velocities at the control points will match, you can interpolate up to the last update rather than the one before, and you can apply this method just as easily to polar coordinates if the game world is inherently polar like Space wars. (Another approach sometimes used for periodic data is to perform a FFT and do trigonometric interpolation in the frequency domain, but that doesn’t sound applicable here.)
What originally appeared here was a derivation of the Hermite spline using linear algebra in a somewhat unusual way that (unless I made a mistake entering it) would have worked. However, the comments convinced me it would be more helpful to give the standard names for what I was talking about. If you are interested in the mathematical details of how and why this works, this is a better explanation: https://math.stackexchange.com/questions/62360/natural-cubic-splines-vs-piecewise-hermite-splines
A better algorithm than the one I gave is to represent the sample points and first derivatives as a tridiagonal matrix that, multiplied by a column vector of coefficients, produces the boundary conditions, and solve for the coefficients. An alternative is to add control points to a Bézier curve where the tangent lines at the sampled points intersect and on the tangent lines at the endpoints. Both methods produce the same, unique, smooth cubic spline.
One situation you might be able to avoid if you were choosing the points rather than receiving updates is if you get a bad sample of points. You can’t, for example, intersect parallel tangent lines, or tell what happened if it’s back in the same place with a nonzero first derivative. You’d never choose those points for a piecewise spline, but you might get them if an object made a swerve between updates.
If my computer weren’t broken right now, here is where I would put fancy graphics like the ones I posted to TeX.SX. Unfortunately, I have to bow out of those for now.
Is this better than straight linear interpolation? Definitely: linear interpolation will get you straight- line paths, quadratic splines won't be smooth, and higher-order polynomials will likely be overfitted. Cubic splines are the standard way to solve that problem.
Are they better for extrapolation, where you try to predict where a game object will go? Possibly not: this way, you’re assuming that a player who’s accelerating will keep accelerating, rather than that they will immediately stop accelerating, and that could put you much further off. However, the time between updates should be short, so you shouldn’t get too far off.
Finally, you might make things a lot easier on yourself by programming in a bit more conservation of momentum. If there’s a limit to how quickly objects can turn, accelerate or decelerate, their paths will not be able to diverge as much from where you predict based on their last positions and velocities.
