It means both, and everything in between.
Like art, the level of detail, work, or competence involved have no bearing on whether it’s cgi, only is it an image that’s been created or altered digitally. Period.
CGI is not a term reserved for multi million dollar high res photo realistic purely computer created images. Any image altered or created digitally is cgi.
I get that you disagree with the established definition. That doesn’t change it.

Removing a mole digitally is cgi.

Any image generated by a computer is cgi, including alterations. That’s what cgi means!

WOW!!! The feels.

So heartwarming.

Guy's freaking talented too. Love how it starts as a big oval then all of a sudden it's a photo-realistic perfect depiction.

Man, it's incredible.

Pretty much why I put quotes around Live Action in the description. At least with Dumbo, there are humans with the photo-realistic CGI.

So... when did photo-realistic CGI animation start being called live action?

I mostly agree, but I did think the static interior shots were photo realistic, but I don't have a 4k screen.
If you smoothed out the jerky camera motion, the last scene had climbed out of the uncanny valley, imo....except the flame.

Actually, you might not understand what the "Uncanny Valley" hypothesis is. It's not simply CG/Humanoid Traits that are not quite realistic. What you're possibly interpreting as "Uncanny Valley" is that the visuals are attempting to appear realistic, but not fooling anyone. There are some elements of the Uncanny Valley here, but possibly not what you were thinking of or what the original poster meant by how it "looks".
The difference between what the Uncanny Valley and this video is that the characters are not meant to be mimicking realism. There are many, many traits here that are cues to an intentionally stylized art direction. The anatomy of the characters is exaggerated, both in the facial forms and body structure. The lighting and materials are certainly drawing from real-world principles, but is far off the mark if you're attempting to portray photo-realistic CG. These are intentional choices by the artists and art directors. It would be a mistake to look at this for how it "fails" to convince you it's real, because it's not meant to.
Where it does enter the Uncanny Valley is in the animation. The immediate loss of inertia displayed by the beheaded horse at the beginning. The animation after the witch jumps onto the horse (is that supposed to be Merigold? They give her less character every time), are physically inaccurate. The best way to describe the Uncanny Valley is to look at things from 20 years hence. In that time, people who may play this game would look at the lighting and rendering as simply early CG, whereas anyone paying attention to the animation, particularly the layman, would see it as "just wrong" because it violates what we subconsciously understand about how the universe works.

Disclaimer: I'm an artist and animator with a lot of experience, and it's not my intention to be offensive, and it's not my intention to say it's not my intention to be offensive while still knowingly being offensive, so I hope that my comment makes a difference.

That's why they include a wire frame editor...so you can take a simple, basic model and modify it to match your individual cat nearly purrrrrfectly (if you spend enough time on the wire frame, and if the unseen parts of it are mirrors in texture and color to the known parts in the photo).
Really, I think that's not what this is for. It seems to be for modeling and manipulating every day objects in photo realistic ways with ease, not turning your parents around in the Christmas photos so they look like they're staring into each others eyes lovingly instead of both angrily turning their backs on the other! (although you COULD use it that way, if you're artistic and patient enough) ;-)

EDIT: One thing no one mentioned yet is it seems to also automatically edit IN the background, one less step to do manually.

...and apparently one can use a built in simple editor to modify the publicly available stock wire frame models to match them exactly to the item in the photo, movie, painting, etc. I see that it's likely more work that they imply, but far less work than previous editors or other ways of doing photo realistic CG. I give a tentative thumbs up.

True, but managing to put it all together in one game in high res with near photo-realistic detail without major stuttering is new. This is the first game movie that's made me think I may want a next gen system.
Of course the salesperson plays up (often over sells) the features of their product, that's their job.

Actually, you'd be surprised at how many advertisements use Art instead of Photos, and you just didn't notice. This is very common in the advertising industry. And not just for product, but on movie posters and advertising as well.

As a photo realist painter myself, my stuff is often mistaken for photographs.

>> ^dag:
^Latency will be a crippling issue for most people for a while yet, I think. Maybe forever for some. Can't get around the old speed of light.

The guy in the video already said that latency isn't such a big problem. OnLive is another such service that is almost ready. Here is a video demonstration which also has low lag.
Maybe for high skill FPS the latency would be noticeable. But at a certain point you would have to choose between photo realistic games with a latency of 25-50ms (if it works out well) or worse looking games on your own computer.

Technically impressive, for sure, but I don't see any practical application for creating cheesy looking collages other than to do what HenningKO suggested.

Your video, PhotoSketch creates a photo-realistic montage from a sketch, has made it into the Top 15 New Videos listing. Congratulations on your achievement. For your contribution you have been awarded 1 Power Point.

Saying this is dancing is like calling a kid's stick-figure painting 'a photo-realistic portrait'. Sorry for the downvote rasch - it's a guilt-inducing one, because the music was quite good

Warsow is fun, but I prefer Nexuiz for death match, or Tremulous for co-op net gaming, sure they could be a little more photo-realistic, but the game mechanics are solid.