I dont know anything about rendering or simulations, but would this method be possible for real time rendering? or is it only applicable for offline rendered stuff (like movie sfx)?
If we assume 5 minutes per frame then even without optimizations we should be able to render 25 frames per second in around 15 years (assuming Moore's law continues to hold)
Frequency increases haven't held. Strictly, Moore's Law is about transistor density - and it's holding so far.
Relevant here is the corollary, that transistors per unit cost doubles every 1.5 years (also held), which in 5 years is approx x10 (10.0793684), so x1,000 in 15 years.
Assuming this simulation is largely parallelizable (likely, because matter acts locally), then for whatever the hardware it ran on cost, in 15 years it should take 5 * 60/1000= .3 seconds per frame (not 0.04s, for 25 fps). In 20 years, it would be .03s (33 fps). But consider that fakey shortcuts that look OK will be assiduously sought.
Moore's Law (and especially this corollary) have a few years left, but maybe not 15 years... However, I'm optimistic about another technology taking over (as has happened previously). There's plenty of scope, considering what brains and cellular machinery can do. (I think the quantum stuff is BS. Probably.)
I know very little about it too, but I think advances in video game visuals have shown that it's really just a matter of time. Check out Uncharted 3's real-time dynamic water effects: http://www.youtube.com/watch?v=BhzMR-vxYIk (Skip to about 2:50)
I noticed some moments in that video where a flashing controller button appeared in the corner. Does that mean the player has to mash the button to continue? I hate games that do that. Why do game makers do that?
I suppose it makes you feel more involved, rather than just watching a bunch of cool cutscenes that you have nothing to do with (common in stylish Japanese RPGs like Devil May Cry, etc)
I don't know how complex the computations are, but if it's close to the computing required by standard loose-accuracy water fluid simulation, we could certainly see it in-game, definitely possible even for this gen of consoles. I speculate as water simulations is quite doable even on 5 year old hardware, though tends to be inaccurate. I remember seeing some Nvidia demos showcases things like softbody destruction and collisions a few years back too, so that also could translate.
There are also some really rough tessellation techniques in use to simulate ground snow walking in games out now, like that Assassins Creed with the native americans.