The Apricot Open Game project "Yo Frankie" shows many improvements in game modeling and shader editing. Visit the Apricot project website for a lot of background information and tutorials. All project results are also bundled on a 8.5 GB DVD, for sale in the Blender e-shop (estimated delivery early November)

Martins Upitis, www.martinsh.co.nr , made a great demo showing the new GLSL and dynamics features in Blender. it shows clearly all features, and is a great piece of design and a fun watch. Note that it requires a powerful and recent 3d card to run it well.
Youtube Video
For the Apricot open game project, support for more advanced display of materials in the viewport and the game engine was added. Enabling it is done through the Game menu at the top of the Blender window, and it will then show in Textured draw mode.
In contrast to the existing Texture Face and Use Blender Materials options for the game engine, the purpose of this system is to stick closely to the material system as in Blender's internal renderer. Only a subset of the material options are supported, with hopefully more in the future, but the ones that are supported should give nearly identical results. Some advanced features like raytracing are not likely to be added given that graphics card don't support them efficiently yet.
This implementation takes advantage of the OpenGL Shading Language (GLSL), and requires a graphics card and drivers that support it. The game engine already supported such GLSL shaders, though they had to be manually written. The following cards typically support it, though the earlier ones have restrictions on the complexity of materials and the number of lights. Be sure to install the latest graphics card drivers as they might fix bugs and improve performance.
Intel or VIA graphics cards, ATI Radeon cards older then the Xx00 series, and Nvidia Geforce cards olderthan the 6x00 series are unlikely to support this functionality well, unless through a slow software fallback. The game menu provides settings to disable things such as lights, advanced shaders or shadows which can help on older graphics cards or complicated scenes.
In short, the main supported features are:
The following images explain in more detail which features are supported. Yellow indicates the feature is supported, red indicates it is partially supported.




The game engine supports GLSL materials as well, and the results should be very similar to would is drawn in the 3d viewport since the same shaders are used. Note however that there are some limitations:
Since Blender's materials system was designed for offline rendering and the GLSL material attempt to be compatible with the internal render, they may not render as fast as more optimized game engines. Therefore it is important to optimize the material and light settings for best performance: