During Microsoft’s GDC press conference, Epic took the time to show off some features of a new version of their Unreal Engine 3. For those of you who don’t know the engine used in Gears of War as well as pretty much ever FPS running on Xbox 360. Undoubtedly, the new Gears of War game, set to release in November, will take full advantage of these features. To summarize, the update will basically add realistic interaction to environment and character models. A full list of known features after the jump.

Ambient Occlusion

Ambient Occlusion is a form of producing soft shadows. It’s also a way of making objects seem soft and smooth.

Notice how the ball looks soft and more defined. it also doesn’t have an annoying glare. This feature also works well with characters. Can you tell Which Marcus Fenix has Ambient occlusion?

High Density Crowds

I’ve always wondered in games or movies like Halo for example, if the enemies were so desperate to get rid of one particular person, why they don’t just send a whole army of soldiers to defeat them? Well now they can! The Unreal Engine 3 can now process hundreds of characters in a scene. That said, they won’t all have AI, but still at least developers can recreate the running of the bulls in real time.

Dynamic Fluid Surfaces

This is one of the more graphically impressive additions to the Unreal Engine 3, and ironically, the simplest to describe: water acts like water. Whatever you do in, to, or at, any type of liquid, be it water or blood, will result in a dynamic and realistic reaction.

Matinee Improvements

This feature is more important for developers than players. Basically, Epic has refined the tool used to create real-time cut-scenes, called Matinee, so that is is easier for game developers to create more cinematic cut scenes. The end result: the Gears of War 2 intro will look really cool.

Soft Body Physics

Object with soft body physics can react realistically to touch or other interactions from outside forces. For example if Marcus Fenix was, very, very, carefully holding a water balloon and pressed it, gently, with his thumb, the water balloon would squish and squeeze realistically. This is great for creating realistic objects that are naturally not solid, like a body.

Destructible Environments

Destructible environments are pretty self explanatory, players can destroy their surroundings at a whim. This can either be a big feature, or a neat gimmick. If players can break the environment in ways that influence the situation, for example being able to break down a tree, like in Crysis, it could lead to very innovative uses of the engine.

However, if what Epic calls “destructible environments” simply consists of breaking bits of cement, at best this is fun eye-candy.

This is all that Epic has revealed so far. Watch the Microsoft GDC keynote for a video demonstration of these features.