The current source engine is what they were talking about. It was designed to be module to allow for upgrades to the system, for example, since HL2 was release

The current source engine is what they were talking about. It was designed to be module to allow for upgrades to the system, for example, since HL2 was release it's gained some major upgrades such as HDR, Soft particles, hardware accelerated facial animations, multi-core support, xbox360, ps3 and osx support (and currently in the process of adding linux support.) All that with very few and minor backward compatibility breaking instances.