This has been bumping around various forums today so I thought I'd bring it here. Visit www.theprodukkt.com to see screenshots if you need proof. Now I just have to figure out exactly how it works.
It's simple actually, the entire thing is basically a 3D compiler with all the instructions needed to run the game, so everything is created on the fly.
Unless your machine is an absolute beast, I strongly suggest you NOT to even attempt to run this. It takes 200mb+ of memory loaded, and I know people who can only get decent framerates on a 3.0ghz + ATI 9800xt, but their algorithms to basically recreate an artist's brushstrokes to generate the textures is very innovative, but not very useful. I mean... Say you wanted to go for a quick game of UT2k4, I doubt anyone would want to sit there and load for an hour. As technology progress, such methods of "compression" (It's not REALLY compression) isn't nessesary.