Yeah, I don't really know what they are but they said that in the video. The shadows don't look that bad, they look low quality but is rather have something like that, a bit more shadowy than Blockland's crazy perfect lines (not perfect but jagged)...actually id rather have Blockland's, it's more realistic but these shadows don't look that bad. Watch the first video for some live gameplay.
this, however, is not a design choice, it's an engine limit. Torque as a whole (including T3D) doesn't do dynamic shadows all that well.
All the shadows in these test shots make small spaces look like those early 3D animations from before they got smooth shading right and everything just looked really weird.