Engine encompasses graphics. Engine encompasses everything! Engine is the code that supports the assets in creating a game. It's the IO, graphics pipeline, audio, special FX, etc. If the PS3 engine was capable of 3 motion axis input and 4 million tessellated triangles a frame at 30 fps and 1080p upscaled graphics, then for a Wii engine to do the same, it needs to handle 3 motion input, 4 million tris per frame and upscaling to 1080p.
Now he could loosely be talking in terms of features and not scale, so Wii could support normal mapping and tessellated LOD to infinity and blah-de-blah but with fewer objects and less pixels and all, but that's not really the same as the same engine. Kinda like if I have a 6 foot tall quadruple expansion steam engine with 8 cylinders generating 1000 watts of power and you have a 6" tall double expansion steam engine with 4 cylinders generating 2 watts of power, though in design principle you have the same engine working in the same way, you'd hardly say your engine can do everything mine can!
Or I suppose he could be saying that the software on Wii could do everything the PS3 can if the hardware was fast enough - that the engine supports all the same features. I s'pose that'd be fair, and hype, but still all the same it'll come back to bite Julian in the butt when, no matter how good his engine is, the hardware produces results that aren't comparable and people say that game isn't as 'technical' as Lair.