I saw this in the new Lionel catalog. Yes, it isn't standard gauge. Yes, it is brilliant.
I liked this for a couple of reasons: it makes setting up a slick looking layout, backdrop, track and so on a no-brainer. It will get more people into the hobby.
The design or concept isn't new. In the days of prewar World War II Lionel trains the displays to show off Lionel's wares in store windows and at retail in stores were very similar to the little layout to the left. The graphics were a bit nicer and the displays plugged Lionel's accessories but the concept was essentially the same. I'll see if I can dig up some pics of the old Lionel displays. Some time ago American Flyer displays were reproduced as well. Same concept: big and colorful backdrop, mock-tunnel the train could run through and a place for accessories and the like. Looked great with O or Standard gauge.
I hope Lionel reproduces this for standard gauge as well.