So what does Physics do in your game? Well, imagine a game where everything that falls, gets kicked, and blows up, would do the same EXACT thing in real life? You kick a ball and it goes exactly where it should go! Physics engine do that, they make everything do, what they're supposed to obeying the laws of physics.
Now, to units, if there was an explosion, expect the units around the explosion to fly and spin around and do whatever they would do in real life! ragdoll effects (the effect that makes bodies fall, realisticly without any premade animation) comes with the physics engine, so you're expecting every unit to die differently depending on the situation they died on, units will also most likely fall in different places, let's say a unit gets blown up and falls into a body of water, the body will float in the water! Or maybe the body falls on top of a building/tree, it will remain up there! So that's physics for yall folks, now go and get a good CPU, cause all the math your PC will be doing will most likely require a good PC
From reading the PCGamer mag, and drawing some conclusions of my own, the physics in AoE3 will probably be as good and beautiful as Halo 2 and Half Life 2. In AoE3, buildings will breake how they're supposed to, meaning, if a cannon ball hits a house wall, expect that wall to crumble the same way it would in real life. Now imagine a cannon ball ripping through a house, man! That also means that buildings won't be destroyed the same way, which is awesome.