Seriously, are you guys doubting Bungie here? I'm 100% convinced that this is all done in their engine with the actual assets, nothing looks impossible here. The only thing to suspect is the AA, as there's just too much of it, thus suggesting that the trailer material has been bullshot-rendered (and making it impossible to tell if they've managed to get rid of the 640p-noAA resolution of the previous games).
The biggest improvement I see is the general quality of all the assets from character and vehicle models to the ground textures and atmosphere effects. The engine already had good lighting and shader capabilities, it was mostly the content that did not make the absolute best use of it. Bungie seems to have taken the criticism of their previous titles to the heart and decided to show the world what they're truly capable of. Talented artists can easily push twice as good looking stuff from the same poly/texture budgets.
Although there's no doubt that the engine has been improved significantly as well, considering all the publications from Bungie that indicated serious research into stuff like shadows. It's just not as obvious as the increase in the quality of the artwork.
On a somewhat different topic, does the girl Spartan has an artificial right arm? I think it's the first time we see such a thing in the Halo universe.