DICE's Frostbite 2.0-powered Battlefield 3 will be a tough act to follow in terms of visual quality, but today Epic is showing off the latest improvements to its Unreal Engine 3 calling it their proposal for what the next generation of gaming will look like. And the company is probably right considering the wide-range of games currently using its graphics engine, with licensees gaining access to these enhanced tools later in the month.

The footage shown at GDC wasn't any game in particular but rather a tech demo featuring several slick new visual-processing techniques such as image-based reflection, improved depth-of-field and anti-aliasing, dynamic tessellation and other DirectX 11 goodies. Epic says it has collaborated with Nvidia to make use of PhysX and APEX technologies, including destruction and clothing modules, which enable realistic character interactions with the environment.

Epic's Mark Rein noted that while this is an updated version of the current engine, the improvement is a bigger leap than the one between Unreal 2 and Unreal 3. You can check out some high-resolution images of Epic's Unreal Engine 3 tech demo here, while the video footage should be dropping on the general public next week. (Update: video posted below)