BTW: The article (10 parts!) deals with other fluid effects besides surfaces, the first few paragraphs even distinguish between them and gases.
Everything about it is beautiful, from the art to the music to the sound effects to the incredible feeling of "being drenched". Natalya Tatarchuk is truly a hero.
Watch it all the way through, with headphones, in fullscreen, or don't watch it at all!
The experience was so much more intense back in 2007; it was breathtaking.
(Nooooo I don't wanna get old! Make it stop!)
However, from what you're saying, the fluid simulation isn't as expensive as I thought.
Sorry, I miscommunicated --- fluid simulation isn't expensive as long as it doesn't affect gameplay. Because then you can do it all on the GPU, and you don't have to transfer it back to the CPU (to perform checks like "is the water touching me?")
In this case, From Dust is simulating the fluids on the CPU, then building geometry / textures on the fly and uploading that to the GPU and rendering. It's quite an impressive tech demo, both from a technical and artistic standpoint.
Big extrapolation: If intel can pull this off, they may be able to own the next platform, of GPU-based computation. I suggest that's the next platform because it seems to be the only place where many-core code is really happening. And many-core is the only way to get Moore power, since clock rates hit a wall.