Nvidia have produced a proof-of-concept demo that shows how standard (albeit powerful and heavily tweaked) graphics processors can be used to render raytraced scenes in real time.
The demo showed animation running 30 frames per second at 1,920 x 1,080. Nvidia cranked the demo up to 2,560 x 1,600 but would not reveal the frame rate. This could have huge implications for in-game graphics, although as the system currently requires 4 parallel Quadro GPUs with 1GB memory apiece, costing around $10,000 a pop it may be a couple of years before this hits even the most hardcore PC gamer's desktop.
Quoth Nvidia, "the ray tracer shows linear scaling rendering of a highly complex, two-million polygon, anti-aliased automotive styling application." Which certainly sounds impressive. What this appears to mean is "Look! A shiny car that we can move around real quick!" and, you know, that may well be enough.