Textures will now reflect light onto other textures meaning a room will light up correctly as will shadows under rock outcroppings on a hillside. Everything from the way light blurs out parts of your vision to the way it reflects off of wet sand has been added to closely model real life. It's hard to explain without getting too technical (which is really beyond my range anyway) so let's just say this: it improves the game visually in a lot of different ways. Hence, they started work on the Lost Coast in order to provide a nice place to demo all of the new features of the lighting.
It's something they were working on to release with Half-Life 2, but a quick stint at trying to push it into a demo at one of the trade shows demonstrated to the team that they were going to need a significant amount of time to get the feature finished. The biggest of the reasons they wanted to build the level was to really test out the new high dynamic range (HDR) lighting system in the Source engine. For those unaware, Lost Coast is a singular level built by Valve set within the story of Half-Life 2 which is a bit of an experiment for Valve for a few reasons. No, it's not Aftermath, but it is interesting in its own right. While up checking out the newest version of Day of Defeat: Source we also had the chance to look at the upcoming Half-Life 2: Lost Coast level.