Edit: Seeing as this video has gained a fair amount of interest, I'll post a quick description of how it works here... This description can be found on their site, via the link above.
How does it work?
If you have a background in the industry you know the above pictures are impossible. A computer cant have unlimited power and it cant process unlimited point cloud data because every time you process a point it must take up some processor time. But I assure you, it's real and it all works.
Unlimited Details method is very different to any 3D method that has been invented so far. The three current systems used in 3D graphics are Ray tracing polygons and point cloud/voxels, they all have strengths and weaknesses. Polygons runs fast but has poor geometry, Ray-trace and voxels have perfect geometry but run very slowly.
Unlimited Detail is a fourth system, which is more like a search algorithm than a 3D engine. It is best explained like this: if you had a word document and you went to the SEARCH tool and typed in a word like MONEY the search tool quickly searches for every place that word appeared in the document. Google and Yahoo are also search engines that go looking for things very quickly. Unlimited Detail is basically a point cloud search algorithm. We can build enormous worlds with huge numbers of points, then compress them down to be very small. The Unlimited Detail engine works out which direction the camera is facing and then searches the data to find only the points it needs to put on the screen it doesnt touch any unneeded points, all it wants is 1024*768 (if that is our resolution) points, one for each pixel of the screen. It has a few tricky things to work out, like: what objects are closest to the camera, what objects cover each other, how big should an object be as it gets further back. But all of this is done by a new sort of method that we call MASS CONNECTED PROCESSING. Mass connected processing is where we have a way of processing masses of data at the same time and then applying the small changes to each part at the end.
The result is a perfect pure bug free 3D engine that gives Unlimited Geometry running super fast, and it's all done in software.