http://video.google.com/videoplay?docid=-1260682614931640265&q=ps3+demo
Here is a demonstration of the physics that the PS3 will be using.
http://video.google.com/videoplay?docid=-8025980825115926132&q=ps3+demo
This one really caught my eye. A gas station being blown up. All done in real time. Incredibly realistic, and in fact, scary if games will actually be this real looking. I mean, back a while ago graphics made games real looking, but now it's all physics and environment interactivity.
The engine actually simulates the gas particles expanding to result in a realistic looking explosion. In real time. That is simply fucking insane.
http://video.google.com/videoplay?docid=-5979131578038806649&q=ps3+demo
And here is a demo for a game called Heavy Rain. Like the others, the demo is run in real time. It's a video of a game character -- kind of shows off the detail of the modeling and the ability to capture emotion in characters. It's almost impossible to believe the woman is made from polygons.
We sure have come a long way. I wonder what next.