GameSpy got to see some live action in Half-Live 2 and they have posted this article to let us know all about it:
"Last week, we presented our massive Half-Life 2 preview, based on a trip to Valve Software during which we saw roughly a dozen short demonstrations of the company's new Source engine in action. This week at E3, in a theater at the ATI booth, Valve Managing Director Gabe Newell took us another tour, showing us a (mostly) new series of roughly a dozen demos, as well as a very brief look at the game being played live in front of us.
To open, Newell gave the group a short primer on the new engine and its strengths. "The Source engine gives up capabilities in four main areas: (1) believable and realistic human beings; (2) graphics that were previously only possible in a Hollywood movie studio; (3) integrated materials and physics systems that create an unprecedented level of interactivity; and (4) artificial intelligence that welds these characters, these effects and this world into an experience that gamers have never had before."