I'm really curious to get a straight and accurate answer regarding how shadows are rendered in Skyrim. If they are drawn on the GPU as a previous poster states, then why do we get such CPU performance increases when shadows settings are altered, especially distance? Considering consoles have great CPUs but bad GPUs, it makes sense Bethesda would take their REALLY OLD engine, and add shadows that use CPU more than GPU to render and draw. That's why the slightest CPU overlock on PC makes the game run so much better when shadws are set high.
Also, I have noticed that Skyrim frequently uses two cores of my quad core CPU to over 90% while my GTX 470 is at 99% load. Skyrim taxes the hell out of my GPU and its memory. The max dedicated video memory I've seen Skyrim use on my GTX 470 is 1140MB. My GPU only has 1280MB. What's even wierder is when I overclock my clock speed & memory spped on my GPU, I still get GPU usage at 99%. Does anyone really know how shadows are rendered in this game?
Considering scene complexity and the scale of the shadow maps involved, generating shadow maps on a CPU is insanity on both console and PC hardware. Intel's http://software.intel.com/en-us/articles/onloaded-shadows-moving-shadow-map-generation-from-the-gpu-to-the-cpu/ could pull off about one low-res shadow map layer per 0.2 seconds with one Intel i7 fully dedicated to the task, and the code was still leaving close-up shadow maps to the GPU.
The GPU's there for a reason -- CPUs do not have arrays of friggin' huge SIMDs and hardware rasterization/buffer ops/thread management to throw at the task. Might make sense to let the SPEs do the final deferred shadow mask step + blur on the PS3, though. The task seems like a decent fit for them.
As you may have noticed, the engine is insanely poorly optimized for PC hardware and if SkyBoost is any indication, the engine is spending about 10-20 times the CPU time it should on some trivial things like dot products. Little things like that get invoked on the CPU a lot when preparing to render objects; messing with the shadow distance is likely making the game take forever figuring out what to render into the shadow map since there's more objects within shadow range to process.