Soft-body physics refers to the handling of deformable objects -- Unreal Engine 3's famous meat cube (opens in new tab) , the billowing cloth (opens in new tab) in Assassin's Creed, and in this case, a pickup truck being mushed into walls. Summon your inner child for some good old fashioned watching-stuff-hit-other-stuff fun.
This CryEngine 3 physics demo spawned from the open source soft-body vehicle sim Rigs of Rods (opens in new tab) . The work in progress has only been in development for "the past few months," according to a Reddit post by Gabe Fink (opens in new tab) , an artist/musician/all-around talented guy (opens in new tab) working on the project.
Based on this video, we can't verify whether or not it's actually "the most realistic damage model ever," but its real-time metal crunching has our attention. As many have pointed out, a simulation system like this, which Fink states can be ported to any engine "pretty easily," would be very welcome in just about any game where vehicles can hit stuff, especially Grand Theft Auto V.
Personally, I skipped over practical applications and got excited at the concept of a next generation Garry's Mod-style playground. With a big selection of objects simulated as well as they are in this demo, and maybe the Euphoria Engine (opens in new tab) to handle actor AI, I'd be in the sandbox of the gods.