we've discussed this before.
http://forums.anandtech.com/showthread.php?t=2066933
http://forums.anandtech.com/showthread.php?t=2057748
as i said in the locked thread, the math and principles are sound.
critical points:
1) these are not voxels or hyper voxels, even voxels get turned into polygons at some point in the render.
2) these are strictly point clouds. while memory intensive, if done right it can still be viable.
3) for static/non deformable scene objects this approach is fine. you might even be able to get leaves to sway a little. Animation deformers of any cloud mesh would be nightmareish.
the update shows that they have addressed some of the issues. ability to convert non-scanned meshes into cloud data, lighting and shadow improvement, general scene complexity.
there shouldnt be a memory issue as long as they are instancing each discrete element. as long as the catalog of elements is assembled in a smart enough way that you can build any object out of little repeated bits, the amount of point clouds could be workable.
such an approach might actually work better for physics destruction and terrain modification.
all deformable/animatable creatures or characters would have to be done in traditional mesh polygons, but if you use a mix of both point clouds and mesh in a game the effect could be very impressive.
game class lighting will be the next hurdle as the number of dynamic lighting effects in games is currently pretty high and without normal data the ability to light these point clouds could be limited.