Tesselation is the base of the art not just something add on top of art as an optionnal step. This is very important from a visual point of view and it helps the artist to go faster and improve the workflow but it is coupled with a great fully dynamic GI lighing system*and shadows system coupling shadow maps, capsule and SSDO. Without the ligthing system it will not be so stunning.
And the dynamic tesselation is part of the LOD system too.
The game quality are exactly the same than Unreal Engine 5 demo but with different rendering method without tesselation and much less polygons here.
Tons of geometry, very high res texture and a realtime and global illumination system probably will define what we will see later in the generation on Xbox Series X|S, PS5 and by extension PC. All made possible because of added power compared to last generation console and the SSD fast streaming system.
* Looks like RTXGI but based on froxel with probes updated depending of frustrum.