To do their colored lighting, they solve the large-polygon problem in the straightforward manner. They don't have large polygons. They break their worlds up into smaller polygons, so the lighting looks smooth. It's straightforward, and works well. The downside is that the larger number of polygons required can bring speed down, but this speed hit isn't nearly as big as the speed hit involved in the other approach.
Explosions are another bit of eye candy that help to make a graphics engine look good.
Again, there are two approaches to doing explosions. The first approach is to make the explosion out of polygons, so that the shape of the explosion is defined by a model, just like a car's shape is. The difference between the explosion and the car, though, is that the explosion's model changes dynamically, so you need some set of algorithms for making the explosion explode, so to speak. This is what I've been playing with so far. It works fairly well, but the explosions still seem to look a little cartoony.