The interesting thing about the demo is it is not a fly by (it was designed with a "whole scene" approach) and the other part is it demonstrates that the "old way" of doing things with fixed function DX7/8 features and offloading to the CPU can actually be done very well in shaders. Some examples of HOW they did this with shaders:
Wipers
Drop Simulation
Ripples in Puddles
Water surface treated in 256x256 segments where position, velocity, and acceleration are calcualted
Water treated as thin elastic membrane (ignore gravity, account for surface tension--solved in realtime in pixel shaders to determine water waves height)
Puddles indepth
Swinging telephone
Shading power is finally getting to the point we can do more stuff than just normal maps or specular highlights--which were basic bells and whistles on top of the fixed function paradigm of "texture, texture, texture". So far the best looking PC games (HL2, Far Cry, CoD2, etc) still are designed with DX7/8 fallback. Basically a lot of shaders have been limited to "eye candy" instead of being the structural foundation.
The
Noticias3d.com slides are worth reading reading because they give a pretty good insight not only into how this was done, but also why a lot of "low end" games struggle on top end PC GPUs and consoles.
Kind of the "harder or smarter" approach. The new GPUs are very shader centric; right now it looks like a lot of titles (which are admittadly ports or titles developed with DX7/8 redundancy) are pushing the hardware the wrong way.
That is why we see such a disparity in titles like GOW, MGS4, the Toystore and Ruby Demos, etc... compared to other less visually appealling titles that "chug". None of the new GPUs are "super DX7 accelerators". They are faster than the DX7 class hardware, but they really have moved in the direction, at least in silicon investment, into heavy shader use.
Toy Store is a good example of what can be accomplished when taking an approach hardware that ignores redundancy and is focused on accenting the hardware's architectural strong points.