Yeah, that's definitely blending between normal maps, makes sense as well. It's something I'd push for too, if we had to do naked bodies, although we would have more detail in the geometry and use maps for tertiary stuff like veins, wrinkles and folds only, probably with stress maps (detecting if a polygon's area gets smaller or larger).
The jiggle part is a bit more complicated to classify. What they probably do is to have a few extra bones there, that they run some simple realtime dynamics on and have them weighted to certain parts of the character model. One could make an argument that this is a simulation.
On the other hand, to me the term muscle simulation means what they do at Weta and ILM and Tippet and such. Which basically means building an anatomically correct model of nearly all the bone and muscle parts in a body, calculating things like collisions and soft tissue volume preservation and even throwing in a fat layer between the muscles and the skin. Knowing that there are hundreds of bones and dozens of muscles you can imagine how insane the calculation requirements are for all of this, and how much it all also depends on the level of detail for all the components.
It's also similar to cloth simulations in that you never go for 100% solutions, you go 90-95-98% of the way and simply fix any remaining and visible errors by hand, frame by frame, because it's all that the audience will see. Building a watertight solution would be even more complex, but that's what you'd need for a game, it usually breaks the illusion when a character falls apart even for just a second. Of course most games today are still full of bad deformations, self-intersections and such, but that only goes to show how much further it all can - and have to be - taken in the future hardware generations.
So that is what I call a simulation, that's why I don't like to call realtime solutions simulations, and I hope it needs no further explanation. I think that secondary dynamics or something like that would be a more appropriate term.
And of course what Rockstar does with the horses is absolutely incomparable to all of the above tech. Not that it doesn't look good.
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