[youtube=425,350]ZrMzxOmQtJg[/youtube]
they demo it with quake 3. the way it works is that it constantly updates about 4-5 players and as the other players become more and more out of your "focus zone", they get updated less frequently. the way that it doesn't make the players in the distance just jump around on your screen is that it creates a "guided" AI that predicts what they'll do depending on their last updated action in the game.
in the demo, it seems to work well. they say this can be used to have battles with hundreds or thousands of players. he specifically says you can target a single person in the distance and hit them.