Indeed it does. Quite literally. The Octave Engine is the world's first simulation engine to dynamically simulate hydrodynamics on a game machine. In the video, the Octave Engine shows how it accurately simulates waves and splashes in Tekken 6. Described as "natural environment middleware," the Octave Engine is not only capable of simulating hydrodynamics but also the physics of other small particle systems, like sand.
In a game like Tekken 6, this technology would definitely add a touch of realism to an otherwise static fighting arena. Imagine this: two combatants are brawling on a beach; characters leave their footprints in the sand as the waves crash against the shore, slowly washing away the prints with each pass. And of course, don't forget this is happening while the characters are knocking each other into the water for some huge, realistic splashes.