Traditional GPUs render a scene by taking the scene geometry (expressed as 3D meshes of triangles) and "pasting" 2D bitmap images (textures) onto those meshes. Pixel and vertex shader programs running on the GPU may also be used to apply additional visual effects to the scene. The advantage of this approach is that it is easy to build highly parallel hardware that can execute texturing operations and shader programs very quickly. All current consumer GPUs rely on this technique.
3D images can also be rendered via ray tracing, which attempts to model how light actually behaves in the real world. Properly applied, it can yield very realistic images. Ray tracing is particularly effective at rendering reflective and refractive objects. Unfortunately, ray tracing is computationally very intensive. Affordable hardware that can do ray tracing in real-time at a level of detail comparable to that of rasterizing GPUs doesn't exist, and is probably still a few years off. Since framerates measured in seconds-per-frame tend to have a negative effect on playability, I don't think we are going to see mainstream ray traced games for a while yet.
Interestingly, most ray tracing algorithms actually work in reverse—instead of tracing the rays from the light sources, reflecting them off the objects in the scene, and then into the camera, they "shoot" rays out from each pixel of the image into the scene, tracing the paths of the rays backwards until they hit a light source. The optical properties of the surfaces each ray reflects off (or passes through), as well as the color of the light source determine the color of the corresponding pixel of the image. The reason for doing things backwards like this is efficiency—very few of the rays of light coming from a light source ever reach the camera, so doing things backwards reduces the amount of calculation required by several orders of magnitude.
Although real-time ray tracing for the masses is still a pipe dream, you can play around with ray tracing algorithms on your PC today (you just have to wait a while for each frame to render). The POV-Ray ray tracer is a popular ray tracing package; it has been around for years, and is available as a free download for Windows, Mac, and Linux. On Windows or Mac, download and run the appropriate installer from the POV-Ray site. For fans of the mighty penguin, your best bet is to install POV-Ray directly from your Linux distro's repositor. On Ubuntu, the packages you want to install are povray and povray-includes; you probably also want to install povray-doc (local copy of the POV-Ray manuals) and povray-examples (sample POV-Ray images). Complete documentation for POV-Ray is also available on their web site, here.
POV-Ray images are created using POV-Ray SDL (Scene Description Language), a programming language that has some superficial similarities to C. In POV-Ray SDL, complex objects are built up out of simpler ones, much as complex data structures in C are built out of the basic data types. Objects are constructed according to the principles of CSG (Constructive Solid Geometry), which allows new objects to be created as the 3-dimensional union, difference, or intersection of simpler objects. The properties of the material each object is composed of are also defined, so that the ray tracer knows how the light rays are affected when they reflect off or pass through the object.
Many options are available for defining the properties of a surface or material. Simple surface pigmentation (as a red/green/blue color triple) can be specified, as well as how reflective or rough the surface is. Complex surface patterns can also be created using procedural textures. POV-Ray comes with a number of pre-defined textures for metal, wood, and stone surfaces; these can be used as-is, or modified to suit your whims. Translucent or transparent materials can also be defined, including a material's refractive index (which determines how the light rays bend as they pass through the object).
Simple bitmap images can also be applied to a surface of a CSG object, much like the texture mapping of a rasterizing GPU.
I've created a sample POV-Ray scene that illustrates many of the principles of CSG and demonstrates the use of POV-Ray's predefined stone, wood, and metal textures. This scene also shows how POV-Ray handles transparent refractive objects. You can download the POV-Ray file for the sample scene here.
The first four images were generated by the sample POV-Ray program linked above. They are all of the same scene; the only thing that has been changed is the camera location. Click each picture for a higher resolution version.
All things considered, this is still a fairly primitive POV-Ray scene. The lighting and object models are simplistic (I chose to use only pawns and rooks because they are relatively easy to model in CSG), and I haven't enabled any of the more sophisticated effects (focal blur, radiosity, etc.), which would result in more photo-realistic images (along with much longer rendering times). But even without these effects, it is possible to produce some interesting images.
POV-Ray isn't limited to creating images that mimic everyday objects—its capabilities are only limited by your imagination and willingness to experiment. You can download another sample SDL file here that's actually quite a bit simpler than the first one. It creates a 3D grid of reflective metallic spheres and places the camera and a single light source at the same point inside the grid. The resulting image (consisting solely of repeated reflections of the light source between the spheres in the grid) is surreal:
I hope you'll decide to download a copy of POV-Ray and play around with it. Once you grasp the basic concepts behind CSG and get the hang of working in SDL, ray-tracing can be a lot of fun... and rather addictive!