Rockstar and NaturalMotion announced a partnership (PDF), which will allow Rockstar to use NaturalMotion's "euphoria" dynamic motion engine for "upcoming next-generation Rockstar Games titles." We cautiously assume this to include GTA IV, so this is one indicator of what we might see in the next GTA.

The purpose of the engine is to create a dynamic environment, in which a body has a skeletal structure and is able to react to any sort of movement. Instead of animators having to animate all possible motions for the body, the engine creates this animation in real time. NaturalMotion was formed from research at Oxford University, as you can read from an interview about the euphoria engine. One of the most known games to use the euphoria engine is Indiana Jones 2007 on the PS3.

There are two videos in particular which I want to draw your attention to. The first one is an animation demo of the 'Adaptive Behaviors' in the endorphin engine (also produced by NaturalMotion), which gives a good idea of the kind of things the company is doing. The second video is of the actual euphoria engine, showcasing how the engine was used for both the Indiana Jones 2007 and Star Wars games.