Lucas Arts is doing some pretty great things, apparently, working with a company named NaturalMotion and their animation software euphoria, they're putting realistic physical reactions into the next Indy game. As the LA project lead Chris Williams says, "The age of the rag doll is over."
IGN has an article http://xbox360.ign.com/articles/702/702389p1.html
that describes what they saw, but they've also got video of tech demos using similar (?) software to euphoria (we'll probably have to wait for E3 to see the Indy stuff ourselves). There were moments in the first one, featuring football players, where it felt like I was watching real humans. Really impressive stuff. Imagine merging that with the amped up graphics and sound and we're getting close to real "Next Gen."
They even seem to be doing something about AI.