So, the performance advantages of Valve's implementation of Multi-Core are clear. Not only will your games run faster by providing an improved frame rate but soon you will begin to see more interactivity, better physics and a greater sense of presence in the world.
In upcoming games using the Source engine and even possibly some older games such as Half Life 2, you'll see smoke which not only drifts around the room but hits the roof and floats out the door in a true-to-life manor. You'll see individual rain drops which put out fire one by one. You'll see advanced AI which delivers more advanced computer enemies. Since the game has more processing power through the additional supported cores, computer enemies will be smarter and even be able to perform tactical analysis against you - for instance, working out the best place to hide because it has the processing power to work out where you are in the world and even where you might go to next. Maybe sometime in the future the US government will contact Valve to create some practice tactical military software for them?
Dual Core improved frame rate, Quad Core will add new experiences to the game such as life-like realism. Valve are bored (somewhat) with the GPU now - as they said, they can already create a model on the GPU to look like a real person but that model cannot act like a real person, yet. Now they want to focus on the CPU and create extreme realism. People ask when Half Life 3 will be ready but as Valve correctly state, the changes that they've made (or are currently making) are as good as a new version of the game.
These Multi-Core enhancements will be gradually added into the Source engine and existing and future games using the engine, such as Episode 2 sometime early next year of Q1. There will be no single patch / update with the changes - they will be added over time.
This is a challenging, exciting, scary and expensive exercise for Valve but they see it as an important key for the future and success of their gaming titles. Gabe mentioned that this is the "most significant development to PC games since the advent of the 3D card..." The hardware is here to make games more realistic and true-to-life, right now game developers need to catch up and implement cool new features and effects into their games to make use of the hardware that is available. During our time with Valve, it is clear to see that they understand this point and that they are willing to put mega investment dollars into making sure that games based on the Valve engine properly and effectively make full use of Multi-Core processors.
So, who is looking even more forward to Episode 2 now? Hold your horses!
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