Under & Over Exposure
Just as a photographer can control the amount of light captured by his camera by adjusting the exposure, HDR rendering gives developers control over the amount of light present in a scene. The following three images are screenshots from Lost Coast: you can click each for larger copies.
The middle image has normal exposure with HDR rendering. The left image is underexposed, resulting in a dark image: foreground detail is heavily muted, and the window to our right is completely invisible. In contrast (literally), the right image is overexposed: note the abundant blooming, whiting out areas of the building in the distance; foreground textures are easily visible.
In standard (SDR) rendering, the aperture is fixed, meaning the amount of light entering our virtual eyes remains constant. Exposure Control, and Dynamic Aperture works the same way the human eye works, constantly adjusting the exposure according to the available light.
One level that Valve use to demonstate this feature puts Gordon in a dark stairway moving towards an open door directly facing the sun. Thanks to HDR rendering, the tunnel walls are very dark because of the over-bright sun: it is amazing how realistic the glare is.
Exposure Control is demonstrated by turning Gordon to the right, facing the wall: with the sunny doorway out of our field of vision, the aperture widens and our eyes adjust to the dark, revealing extra detail on the floor and walls of the tunnel. Turn again to peer out the door, and you'll find yourself wincing involuntarily at the light, and wishing Gordon had brought his sunglasses.
Of course, once Gordon walks through the door into the area outside, his eyes adjust again to the amount of light - the aperture narrows - and we can see where we are going again. Once all games employ HDR, there will be no going back: SDR titles look flat and lifeless in comparison.
You can see clear superiority of High-Dynamic Range rendering in these two screenshots below (click for larger versions)
If you thought Half Life 2 looked good before, just take a look and these: the blinding sunlight reflecting off the water; the brightness of the sun blooming over the village buildings; the over-bright highlights on the top of the gun.
If you look closely at the first screenshot, you will see just how much more realistic the wet sand at Gordon's feet is, and how the entire distant landscape is darker against the bright sun. Compared with the HDR scene, the Fixed Aperture appears very dull: even lighting and completely lacking the highlights that bring the HDR scene to life.
The most dramatic difference is with the rendering of an old fisherman you meet in the harbour:
Standard rendering is on the left, and HDR rendering is on the right - wow! OK, so you caught me: the first image is actually a Valve concept sketch, but the transformation from paper to full HDR rendering is truely impressive.