I think the unlimited detail refers to rendering speed, not memory requirements. The data has to be redundant to fit in memory. He also claims it runs on a laptop without GPU. So it can't be just octree or any other regular acceleration structure. So if it isn't scam, it's something new.
From the author (old post on Beyond3D): "firstly the system isn’t ray tracing at all or anything like ray tracing. Ray tracing uses up lots of nasty multiplication and divide operators and so isn’t very fast or friendly.
Unlimited Detail is a sorting algorithm that retrieves only the 3d atoms (I wont say voxels any more it seems that word doesn’t have the prestige in the games industry that it enjoys in medicine and the sciences) that are needed, exactly one for each pixel on the screen, it displays them using a very different procedure from individual 3d to 2d conversion, instead we use a mass 3d to 2d conversion that shares the common elements of the 2d positions of all the dots combined. And so we get lots of geometry and lots of speed, speed isn’t fantastic yet compared to hardware, but its very good for a software application that’s not written for dual core. We get about 24-30 fps 1024*768 for that demo of the pyramids of monsters. The media is hyping up the death of polygons but really that’s just not practical, this will probably be released as “backgrounds only” for the next few years, until we have made a lot more tools to work with."
I agree with what I think your unstated point is (namely this is basically raytracing). I think the detail here is that this is essentially a sorting/data-organisational solution rather than a geometrically calculated solution. Ray tracing generally takes into account more than one atom (often at complex geometric angles to the directly visible surface) to create a pixel. This claims not to (but to look really good I would have thought it will eventually have to).
So yes. This is a kind of raytracing but I think that the implementation is radically different to the commonly used raytracing implementaions.
From the author (old post on Beyond3D): "firstly the system isn’t ray tracing at all or anything like ray tracing. Ray tracing uses up lots of nasty multiplication and divide operators and so isn’t very fast or friendly. Unlimited Detail is a sorting algorithm that retrieves only the 3d atoms (I wont say voxels any more it seems that word doesn’t have the prestige in the games industry that it enjoys in medicine and the sciences) that are needed, exactly one for each pixel on the screen, it displays them using a very different procedure from individual 3d to 2d conversion, instead we use a mass 3d to 2d conversion that shares the common elements of the 2d positions of all the dots combined. And so we get lots of geometry and lots of speed, speed isn’t fantastic yet compared to hardware, but its very good for a software application that’s not written for dual core. We get about 24-30 fps 1024*768 for that demo of the pyramids of monsters. The media is hyping up the death of polygons but really that’s just not practical, this will probably be released as “backgrounds only” for the next few years, until we have made a lot more tools to work with."