Drawing from technologies developed for military flight simulation and virtual reality, a system for efficiently modeling and simulating urban environments has been implemented at UCLA. This system combines relatively simple 3-dimensional models (from a traditional CAD standpoint) with aerial photographs and street level video to create a realistic (down to plants, street signs and the graffiti on the walls) model of an urban neighborhood which can then be used for interactive fly and walk-through demonstrations.
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Jepson et al. (1995) studied this question.