From Sonic Retro
Yoshihisa Hashimoto, who had been hired on as an enemy programmer for Sonic Adventure after college, was assigned as the director for the next big Sonic game (in 2005). He had worked on the past several Sonic games, and after analyzing past mistakes decided what needed to be done move the series forward. His team began working on the Hedgehog Engine in 2005, and spent the next three years in development. They planned on licensing the engine, so that other companies could pay for use of the technology.
The Hedgehog Engine is capable of producing CGI film quality graphics. Hashimoto spent months analyzing video games, CGI films, and even people and places in real life. He came to the conclusion that current generation games are missing an element known in the computer animation field as Global Illumination. This allows for a light source to hit a scene, and light is reflected off every object in the environment. To cover the vast amounts of calculations that needed to be processed, they also came up with a system that connected 100 computers for the team to distribute the work load. This enabled them to complete all the lighting calculations for an action stage (which is about 6-8 miles long) in 2 or 3 days.
Hashimoto's team also developed a technology called Light Field, which blended the characters naturally into the environments. With this technology, Sonic is able to run through an action stage while light is being reflected off him naturally, as if he “belongs” there (in contrast to past games where Sonic looks out of place in several environments). Shadows are cast off the characters into the environment as well.
Hedgehog Engine "Sonic Unleashed" Gallery