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Computer-generated imagery (CGI) is the application of the field of computer graphics or, more specifically, 3D computer graphics to special effects in films, television programs, commercials, simulators and simulation generally, and printed media.
Video games usually use real-time computer graphics (rarely referred to as CGI), but may also include pre-rendered "cut scenes" and intro movies (or FMVs--full motion videos) that would be typical CGI applications.
CGI is used for visual effects because computer generated effects are more controllable than other more physically based processes, such as constructing miniatures for effects shots or hiring extras for crowd scenes, and because it allows the creation of images that would not be feasible using any other technology.
It can also allow a single graphic artist to produce such content without the use of actors, expensive set pieces, or props.
Simulators, particularly flight simulators, and simulation generally, make extensive use of CGI techniques for representing the outside world.
Models are constructed out of geometrical vertices, faces, and edges in a 3D coordinate system. Objects are sculpted much like real clay or plaster, working from general forms to specific details with various sculpting tools.