The simulation method used is Material Point Method, a technical that is used in engineering simulation but hasn't really been used much in Visual Effects. This will likely change now that there are these impressive results.
The one issue I've seen people in the industry mention about this paper is that the the simulation times are quite long.
It is too bad they didn't break out the individual steps to show where the time was spent. Could simply be unoptimized code. I notice there is a restriction on the time step to be less than 0.5 x 10^-3 s, not sure if that is the main difference.
I work on a real-time multi-player game, and our physics step is actually larger than our framerate, we interpolate the rest, I guess that's quite the opposite of this :)