The demo starts with Gordon Freeman falling into the water on an unspecified shore, with a small town on a mountaintop visible in the distance. You're given an option to enable special developer commentary when the level starts, and if you turn it on, you'll see little orange chat bubbles spinning in varying locations. Hitting the "Use" key on any of these bubbles starts an audio track, where different Valve developers talk about the technology, game design, characters, or other elements of the demo. The very first piece of commentary is from Gabe Newell, describing, appropriately enough, the commentary system.
The major focus of the demo, however, is the new "high-dynamic range" lighting technology ("HDR" for short), which simulates how the eye reacts when moving from a dark area to a bright one, or vice versa. This is illustrated in one of the early commentary bubbles, which temporarily takes over the demo for a few seconds and shows a splitscreen of the "old" way of lighting compared to HRD.
You can see the difference between the standard lighting and the new HDR effects in this splitscreen shot.
If you explore the starting area, you'll come across the ruined hull of an old ship, which, as Valve's Robin Walker explains, was once part of a puzzle that was put on hold in favor of more interesting elements to the demo, such as soldiers rappelling in to fight, similar to a scene in the original Half-Life. You can see a church high above, which is actually the main goal of the level.
On the docks, you meet an old fisherman (below), who tells you the church on the mountaintop has been loaded with a big gun that's shelling the town in the distance. You'll need to make your way up the cliffside to the church and shut down the gun. The old chap unlocks the gate for you so you can start your climb.
Oh, and it's all pretty photogenic, if you hadn't noticed.
Next: the Cliffside
