San Francisco (CA) - At Microsoft's GDC keynote, Epic technical director and CEO Tim Sweeney showed off the updated Unreal Engine 3 in a graphics buzzword-filled presentation. The new engine will power the upcoming Gears of War 2 and promises great things like hundreds of bad guys on the screen, dynamic shadows and better character lighting.

In our video you can also see more realistic water rendering as characters shoot and jump into puddles and pools. Tim got the crowd laughing when started shooting a huge cube of meat to demonstrate the new elastic and viscous object properties.