Gamasutra cornered Epic Games' Mike Capps (he of the very impressive Epic Citadel demo yesterday at the Apple special event), and Capps confirms that what you see running on your iPhone is the real deal -- Unreal Engine 3, with all of the bells and whistles that it has on the major HD consoles. The actual game that Project Sword will become is being designed by Chair (which is the same group that did the popular Shadow Complex game for Xbox 360), and we'll see the full project soon.
Capps also confirms that UE 3 needs at least an iPhone 3GS to run, but he says that in terms of hardware, Apple's devices are right where they need to be. High-resolution textures are an issue (you can't install a 15gb game on an 16gb portable device), but the memory and speed are actually there, says Capps. "You've got 16 gigs of flash memory," he says, "which is way better, faster memory than what most people have generally on a home PC. So that stuff works really well."
The biggest issue holding handheld gaming back is larger environments, but game developers are getting better and better at designing worlds that render quickly and well to all kinds of platforms. And Capps looks into the future, and sees even more possibilities for Apple and their product lines. "It doesn't take a whole lot of leaps of faith to say, 'Right now, I can display from my iPad to my Apple TV on a big screen TV.' How far away are we from 'that's my game console, and it's displaying wirelessly to my television set?' It's not far away."
That's kind of a trippy thought -- that Apple had to finally move away from the Mac to earn a larger foothold in gaming. It's very heartening, as a gamer and an Apple fan, to hear Capps as excited as he is about the possibilities for iOS and the App Store.