No, Bethesda haven't upgraded their engine again, this is real life. Right down to the dragon. Yes, that is a real dragon, genetically engineered in Bethesda's bio-vaults, where a series of iterative experiments from Bethesda's top mad scientists yielded a creature that could land dramatically in front of heroes and roar at them without actually attacking or hurting anybody. All it took was some minor gene splicing, incorporating several species of lizard, a honey badger and a little bit of Ostrich to achieve the desired effect.
Interestingly, the man you see walking towards the dragon is entirely constructed from CGI , as putting a real person near the monster was considered too dangerous. An easy task for a company with enough money to create a high-budget live-action trailer for a game that looks great on its own. We can't wait for Skyrim. It's out on November 11.