In any game, motion capture is always just a starting point for animators anyway -- the data is always very noise and needs to be cleaned up, and then tweaked, and further animated by hand.
It's not a full solution, just a time-saving tool.
For those studios who don't use motion capture. How are they able to create such smooth and realistic movements?
Not all AAA games have characters that need realistic animations and it is entierly possible to make realistic animations by hand.
I posted another thread earlier (http://www.gamedev.net/topic/631482-animations-in-good-and-bad-games/). The answer i got there was this:
"Animation is a vast domain with not a lot of focus put into it, it's often a sidenote to rendering or AI. For example, there isn't even an animation specific forum on gamedev, which I find odd.
I've worked on animation as a programmer for a few years now on a couple of AAA titles, and I think that it would be VERY hard (maybe not impossible) for a 10 man team to compete with the big boys for the following reasons:
-Access to motion capture: Without access to motion capture or without a pipeline to process motion captured data into a game usable format, animators will have to hand code their animations which is painstaking. Even then, it's hard to capture subtle, realistic movements by hand. Big inhuman movements (i.e. a dragon flying spewing fire) are more forgiving.
-Animation tools: big studios have sophisticated animation solutions that have been built up over time and can be shared across games with tons of animation assets that can be re-used.
-Manpower: 10 people for an entire game is probably slightly bigger than the size of a dedicated animation team for a AAA title. There is likely one or two people dedicated to animation at most on a 10 man team, and even then they are likely split between AI and animation work (or perhaps even more domains). For smaller teams to be able to compete with bigger teams, you need better people, which can happen, but it is probably the exception rather than the rule.
Even big games often get lazy with animation. The Elder Scrolls titles look decent from a first person perspective, but switching to 3rd person view, you can see how terrible the locomotion of the player's avatar is. The reason this is ok is that few people actually play from this view, so it makes sense to not spend too much time or money on that particular feature when the visible characters can be constrained to always move in ways that look good."
This makes me a bit confused having received different answers.