is its all in game engine. 

Naughty dog uses the in game engine to create its cutscenes so there is an graphical even flow from gameplay to cut scene to gameplay. Instead of using CGI which some games still do. Many studios are now adopting Naughty Dog's methods like Zipper Interactive with Socom 4. 

But whats amazing about there trailer is it Looks beautiful and all in game engine and its pretty early and watching the UC2 trailer from 2 years back the actual scene in the game looks even better. 

It justs shows that Sony spending billions on the hardware paid off

Uncharted and Uncharted 2 is all in game too.

you just answered your own question...if I'm reading it correctly

Hopefully every game developer will use in-game engines to make the cutscenes in their games from now on. It was the first thing I thought about when we jumped into this gen, but it seems that most of them weren't ready yet or still prefer their CGI fests over the real thing (Square Enix for example).

Didnt God of war3 do the same thing use in-game engine for their cutscenes

What you saw in the cutscenes is actually what you see in game, the camera is just not close anymore. Except for bad ass cutscenes, like the last one, where they used in engine stuff, they said it themselves, because it was too cool so they enhanced it a bit.