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I honestly think its a mix of both. I was just shown a preview of a xbox360 game where the player walks around a city, but occasionally for special events it seamlessly cuts to CGI and back again. the process is completely unnoticable and looks incredible. Thats what i think that video is.
Especially when you can see effects such as texture ripping and dissapearing vehicles that they wouldnt need to do in a pure CGI video.
But surely this has already been discussed
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