The folks over at Havok have introduced two new physics engines focusing on some interesting properties -- one is called "Destruction" and the other is called "Cloth". The former allows for complete and realistic environmental destruction unlike anything we've seen to date. Based on the material in the game (sheet metal, wood, et cetera) they will react differently upon destruction. Rocks explode chaotically, wood will splinter along their grain and metallic objects bulge and break as expected in real life.
Cloth technology is what you see in the video up top. It's not as cool sounding, but it boasts the ability to have clothes react true-to-life. Notice how the cape never tangles in the character's legs and doesn't automatically fly all the way up when he jumps. It acts like a normal cape would if you wanted to go jump around in a cape outside on a moderately breezy day. Cool stuff! We look forward to seeing these implemented in future games!