This screenshot is from a game I am making currently. It is a heightmap
landscape with a stretched texture and detail texture to make it look
nice. Dynamic lights at the camera location (which is why the closest tree
is lighter than the others) as well as inside the house in the
background. Despite the blue sky(skybox) it is a raining and you will
notice a few raindrops on screen :) The trees are just simple static
models. You can run around the landscape with full sliding collisions.
The engine I am using is TrueVision3D from www.truevision3d.com- it's a
very powerful engine with tons of features. Its free for noncommercial use
and otherwise inexpensive.