The video is not pre-rendered and shows off the physics capabilities of the CryENGINE2 in realtime. The engine can handle several hundred “teapots” at once including dynamic shadows which you can see ingame.
The video is based on a level that has been created especially for this showcase. It also can be played live at the Crytek booth on the machines that are provided there. This provides full interaction with the level itself while the physics demonstration is proceding.
Watch the video: http://www.gametrailers.com/player/30965.html
Download: http://www.gametrailers.com/download/30965/t_cryengine2_gdc08_demo_pt2_gt_h264.wmv (right click > save as)
Shown and demoed at GDC08.