It's horrible. I'm sorry. I can't defend this with any degree of sincerity.
There are some especially nice technical touches, namely the water and all the little effects going off in the background. The way they used the PS3 is pretty groundbreaking actually, with these huge cities and sweeping vistas.
Too bad you can't see it because the aliasing is horrible! Also, the textures vary from "OMG that's the most detailed thing I've ever seen!" to downright laughable, PS2 quality. The color scheme also obscures any beauty you might have otherwise seen.
The dragon and its rider are awesome to look at, unfortunately actually controlling either of them kills it for you.
Don't get me wrong. The controls are actually responsive. And if all you had to do was fly through rings, this game would be amazing! Best ring-flying simulator ever. But sadly, it is not, and navigating narrow spaces, turning around, etc. becomes a confusing, frustrating chore.
Lair is definitely the type of game I always imagined on my next-gen systems, but its execution is piss poor. It's a waste of some really good tech.
Not to developers: If you're going to make a tech demo, keep it simple, make it fun.
And note, there's a fundamental difference between learning to play something and wanting to learn to play something.
Lair doesn't make you desire the latter.