It doesn't directly contribute to it, but what he is saying is that they wanted realistic lighting and a rich, detailed environment/car models for the showroom Kinect 'walkaround' parts, and in creating this new lighting model they were able to apply it to the whole game, resulting in the improved visuals overall.
Exactly and they mentioned that the ALPS track was a real test for their new lighting model. Simply because of all the snow, shadows, water, draw distance, tunnels etc. It covers a full dynamic contrast to ensure the lighting was upto the job and the car look (as they refer to it) as "seated" in whatever enviorment it is placed in. The new lighting does more than just reflections and adds much more realisim.
Their are however improvements to cockpits, even in game and noticable also on replays already shown. It is not just FM3 graphics, cars, tracks with new lighting added.