That's not pre-rendered, as far as I can tell. That's real-time.
We would have watched Vainio edit it live, but his computer kept crashing and we didn't actually get to see that part. Instead, we got to watch him play around with smoke effects in a different scene. (No video available of that scene yet.)
Some have worried that this console generation will bring with it diminishing returns—in other words, next-gen graphical advancements won't be that big a deal. But after getting some up-close time with the visual effects, and the environments, and the animations, I'm skeptical about that claim. This game looks great—significantly better than anything I've seen on this generation—and assuming we're not all falling for some sort of massive schemes, the memory boosts on next-gen consoles really can open up some lovely doors.
Perhaps more impressive than the visuals is the amount of time and detail that goes into even the most trivial aspects of a game like Infamous: Second Son. It’s funny: so many of us spend so much time playing video games, but how often do we really notice the sound design, let alone recognize that the audio for each of a game's superpowers is composed of 25 different sounds?