ATI is working with Havok and their Havok FX™ effects physics engine which enables game developers to produce more convincing environments that include richer, more detailed explosions, smoke, debris, fluids, cloth and hair.
I found this article. May be old. Not sure of that.
Intel is helping AMD with Havok for the moment because the two are not currently in compeitition with each other when it comes to high end graphics.
This is in Intel's best interest. Because it helps keeps Nvidia's marketshare down and when Intel is ready to enter the high end GPU market then they can just let AMD's Havok license expire then Intel takes sole control of first place. Or at least have a lot better "Field Position" as they say in Football.