The actual cinematics are all separate pre-rendered video files. We do have some sequences where we do what I guess could be called real-time cutscenes (like the "reveal camera" moments, for example), but percentagewise, those are definitely in the minority.
All of the cinematics have been rendered by our game engine, though. It's just that we use more high-resolution models because the camera tends to be a lot closer to the characters than during gameplay, and we throw in a bunch of post-processing to make things look very pretty.
I'm sure we've mentioned this before, but it's also worth pointing out that we do almost all of the major loading in the game during the cinematics -- I believe the only instances you will see a loading screen is when you die, and when you come back to the game after turning it off. (Unless I forgot something, but I'm pretty sure that's it.)
http://forum.alanwake.com/showpost.php?p=66276&postcount=
so all cinematics in alan wake didn't posible on xbox 360?
