FLEX is something that needs to be seen to be believed, with some impressive physic calculations being done in real-time with water and cloths. We have a video of FLEX above, which you really need to check out. The demo was nothing short of amazing, with physics seemingly jumping to an entire new level thanks to the engineers and brains at NVIDIA.
Hot Hardware on the other hand has a video of Flame Works, a a film-quality volumetric effect engine for smoke and fire effects!