I wonder how much overhead running a fully 3d game like UT3 in Flash Player would have compared to running it natively as an application.
This snippet is odd though:
"Developers can now animate millions of objects with smooth 60 frames per second rendering and deliver console-quality games on Mac OS, Windows and connected televisions."
And they couldn't do this before? Flash Player is no cloud gaming system, so it's not going to make it any easier. Having to go through Flash Player and the web browser to get at system resources would be harder to do than just using DirectX or OpenGL, if anything. Also there's the issue of what 3d API Flash Player is based on. WebGL is the most widely used hardware accelerated rendering solution on web browsers, but Microsoft has refrained from supporting WebGL in Internet Explorer 9 for alleged security reasons -- some form of DirectX is likely used with them (Firefox is compatible with a form of Direct3D 10 acceleration too, btw). Flash Player could avoid the issue by making their own API entirely though.
Edit: Ok, I actually watched the demonstration, and some of my questions were answered. Tim Sweeney said that Flash Player provides a shader library comparable to OpenGL -- suggesting that underlying the whole thing is a API of Flash Player's own making. It was played in Firefox, so if I'm wrong on that it suggests a WebGL connection. Sweeney also says that the code is "compatible cross-browser". "Compatible"? Does that mean it could work with various browsers, but some have yet to allow for official support? Games can be coded for each browser, but have to be coded individually? Maybe I'm reading too much into it.
My questions aside, it's cool to see that the technology that used to just power little browser-based minigames has evolved into full 3d support.