That looks just awesome.
Now, I don't get the fuss about the increased workload -- I disagree that a good displacement map cannot be hand-drawn. It can. It requires no more fidelity than a height-map used for parallax occlusion mapping.
The stone walls were almost definitely hand-modelled, but I don't see a reason for the rocky-road to be.
Also, not every surface requires a displacement map -- those areas covered with grass would just waste resources if they had a fancy displacement map; other things that the player isn't meant to get close to won't need to tessellate at all. For many surfaces a simple normal map will suffice -- this demo was intentionally very bumpy.
But I very much look forward to using DirectX 11 -- at first only DirectCompute and Direct2D caught my fancy, but now the tessellation is really enticing

That dragon looked SO cool!
Jibb