Meh, count me in as skeptical. ; There's been some neat tricks emerging in the image processing world in the past few years, including some incredible looking stuff with intelligent image resizing that I wish I had a link for.
But.. all I can say about this demo was that it was in a low quality, standard definition youtube video. ; And already you can see some issues, like how it did generate some patterns in the clouds.
I look forward to seeing if this makes it to CS5 (I assume that's why this is coming out, to promote the new version?), and to playing around with it to see if it's really as all seeing and all dancing as they try to make it out to be.
But just one thing.. that business with editing the tree out of the sky? ; I don't think it would have been near as difficult to do with currently available tools as he tried to make it sound. ; The gradient makes it a little fiddly, perhaps.. but I think all that needs is skillful use of a tool that's been out since before Photoshop even received the CS version naming.