After finishing The Witcher 2 for X360, CDPR decided to push things a bit further, thus RED Engine 3 was created. RED Engine 3 supports dynamic cloth physics, a new mimics system, dynamically loaded appearances (no need to load all and then choose), a new animation system that is not based on Havok, a fur solution, triangle count support that is up to 40K and 2K textures for the characters heads and bodies.
CD Projekt RED has also experimented with DX11 tessellation on characters, however it seems that The Witcher 3 wont support it (do note that the game will most probably take advantage of DX11 tessellation for its environments). According to the developers, the company experimented with two tessellation methods: PN Triangles and Displacement mapping. The first technique did not bring much additional detail to the characters, while the second technique was promising. Still, in order to use Displacement mapping as a tessellation solution, CDPR would need to change its pipeline. Not only that, but that particular technique brought a swimming effect and some hole that were caused by the tessellation itself.
Source: http://www.dsogaming.com/news/red-e...d-in-the-witcher-3-new-tech-details-unveiled/
Hope we see some gameplay footage at Gamescom.