fuark!!!! bring on alternate reality life... shit just got REAL. keep watching to "one year later" [video=youtube;00gAbgBu8R4]http://www.youtube.com/watch?v=00gAbgBu8R4&feature=player_embedded#at=285[/video]
John Carmack said he thinks it's pretty far off on his Twitter. Still, pretty amazing and likely the future of gaming. 2015 maybe?
Judging from the video I'd say they still haven't solved the problem of movement of the atoms. So our worlds could look like that, but any objects moving on it would have to be made of polygons still unless they've solved it.
That's my understanding as well. Collision/movement is a problem although for at least collision you can just make bounding boxes etc. like how it's done currently. Old voxel games like Outcast did just what you said and used polygons for characters and other moving objects. This stuff is pretty amazing detail wise but I need to see an actual demo with physics/ai/animation etc. before I get terribly excited.
I am creepily reminded of the whole "bitboys" or "Phantom" things of years past. This smells like another method to part "investors" from their "funds"....
Notch (creator of Minecraft) is less optimistic about the technology and no it's not because it's the exact opposite graphics principle that Minecraft follows: But yeah, it's fucking GORGEOUS!