Check it out - although they say some of the graphics in the movie are not rendered on-the-fly, and may be from the artists portfolio, this has got to be the most impressive virtual world demo reel I've ever seen.
If this goes live soon, just watch
SL empty out. Seriously.
Link:
LivePlace To Launch Photo-Realistic Virtual World Rendered In The Cloud
Off the top of my head - depth of field effects, global illumination, high-density avatar meshes, animations, shader-like rendering.....
Holy crap, people!
Edit: I've archived the video in case it gets pulled. (I guess they didn't want it getting out too early?) Apparently it already has been on the official site.
Re-Edit: Some people have expressed that it may be a rigged demo. Beats me, but hey -- it sure looks damn nice.