The promise of a new physics engine for the virtual world has been a long time in coming, and the hope is that it will bring with it fewer crashes, less lag, and better overall physics and tangibility to the virtual world of Second Life.
For the time being of course it's all still in Beta, which means it really doesn't work right yet. The picture here shows one peculiar issue where a bunch of boxes I rezzed don't quite sit on top of one another, although when stacked and walked into they tumble realistically. There are several other issues (see release notes), but this is fully acknowledged and the community is being asked to participate in getting everything worked out. They've established a wiki for the Havok 4 Beta, and a place for users to tell Linden Lab about everything they discover on the issue tracker.
For those of you really wanting to get in-depth about the Havok 4 engine, the Lindens will be holding "Havok 4 Office Hours" in Second Life at the Brampton Linden Stage Tuesdays at 9pm PDT and Thursdays at 8am PDT.
If the Havok 4 engine really does end up working the way it's supposed to, we'll see many changes in the way people spend time in Second Life. Vehicles, games, and even buildings will behave a little differently, hopefully for the better. The most basic of consumer demands - that things work the way we expect them to - may be met by this change. If that happens, who knows what else is possible?