It's all in 3D but has been rendered out to look almost 2D with lots of textures and flat linework, I think when it's done it's going to look really great. I'm working on the rendering/compositing part and it's been a really great experience.
Here's what the shots look like when they're first rendered out of 3D Studio Max (my job is basically making it go from this):
...and when they get more of the textures (to this):
(I'm going to get some pictures to give more of an idea when I go back to work but sorry Joe for pinching these for now!)