The demo comprised a ray traced version of the game "Enemy Territory: Quake Wars" running on a system with Larrabee and that forthcoming Gulftown 6-core processor. Results were nothing overly impressive, it seems -- the animation video ran at somewhere around 25 FPS or less. Evidently real-time ray tracing is still some ways off as there's a lot of fine tuning to do, but Intel believes it will become a viable - and even preferable - alternative to rasterization in video games.
Larrabee will also do rasterized graphics, of course, but its real strength will be in its multiple X86 cores and things like "task parallelism" which will supposedly offer developers a much easier and quicker coding experience compared to Nvidia and AMD's discrete offerings.
No details were offered with regards to a specific product or planned release date, other than acknowledging discrete graphics card based on Larrabee will eventually be released for use in high-end gaming PCs and workstations.