Even though very little information has come out so far, I wouldn't be surprised if the animation was made from game assets that were already in production. The actual Killzone developer may have farmed out that video production to a 3rd party and supplied them with models, textures and sound effects and said "make something awesome".
Since the hardware is still under development, the actual game code is probably the part that's the least advanced for most of the next-gen developers, but I'm sure they all have relatively accurate specs for polygon count, which means they are probably advanced enough in their art assets production (which is the time-intensive part of development anyways).
Oh and to whoever pointed out Gears of War, that's an XBox 360 game as far as I know, not a PS3 game.
From everything I've read, the PS3 Unreal 3 engine demo and the E3 Fight Night demo were the only real-time demos done (other than the tech demos).
And you know, I don't see why everyone is freaking out. The console is like a YEAR away from being released, so I think people had way too high expectations if they thought that Sony would be showing footage from 10+ games in real-time.
I'm sure the last thing they wanted was for the games to crash or be glitchy during their presentation (like Microsoft's infamous BSOD's during Windows keynotes).
The Unreal 3 demo was SUPER impressive, especially if it only took 2 months to port over to the PS3 hardware. But the Unreal codebase as a whole is very mature, and based on the fact that it's available as middleware for PC (Windows and Linux), XBox and PS2 already, it's probably very portable, so getting it up and running might have been easier than a from-scratch engine that other developers are working on.
The one thing I do not get though is that if the unreal 3 and the fight night demos were the only real time ones, what were they running on. Were they running on a cell processor computer or were they running on a normal computer?. I would really like to know as the xbox360 demos, as most know, were running on a computer 1/3rd the power of the release system.
Sony, you can keep all your CG movies. You can also keep your stupid flying over landscapes,valleys and ducks in bath demos. I don't want to see Tekken 6 screens with 80000 polygons per sweat bead either.It doesn't mean anything.
Sony = kings of hype.
They have SO MUCH to prove right now (in 2006). People are just people, stupid, like flashy stuff etc. I don't think Killzone will win the GOTS award it simply can't cause it wasn't a game technically.