Hi,
I watched the blender conference clip on the game engine a week back only. And I noticed this screen and it was only a screen print of a 3D scene which reminded me of a game like Far Cry.
Textures and lighting, are obviously a part of that scene. The water is an example from somebody who has managed t create that kind of water. I imagine there isn’t too much to it, no python code for example.
Hi, as far as I know Armory (what you see in this video) is a wip game engine based on the cycles renderer. You can see the web page here:
http://armory3d.org/
Blenderartists thread: https://blenderartists.org/forum/showthread.php?393104-Armory-Engine-Feedback-Armory-at-Blender-Conference!
Only thing is, I’m not sure what you’re asking 
How was the detail done, its quite sharp. You state cycles are being used to create it, so obviously the detail is done using cycles.
I doubt I can run it on XP. Ah it is also a paid project.
Cycles is a “renderer”, and I think the game engine uses the node editor from the renderer, not the actual renderer itself, if I recall.
It doesn’t really matter what operating system you have, what matters are the specs; graphics cards, GPU/CPU and RAM. If those are up to snuff, that should be enough 
I have access to a Pentium 4, with either 1GB or 1.5GB of RAM. I don’t think their up to that.