They used in game assets, such as the Striders (the big H.G Wells style Tripod thingy), the weapon sounds, the Combine Gunships, and all sorts. These were mixed in with footage of real locations, and then a whole load of special effects were used to morph it all together. It's pretty darn clever really, considering their tight budget.
They obviously have a real feel for the game, they must be big fans.