To me it looked like part of that was ingame, but I must be wrong because then Valve would have to have made a new engine, which we know they aren't going to do until HL3.
That is definitely a new engine. Unless I am mistaken, They are going to add a new tool into it that allows you to paint surfaces to change their material, like making something more slippery, sticky, bouncy, glass, metal. Sounds like it's going to be pretty awesome.