Ah! Deformable terrain was dropped for the demo. The issues have been solved now, so it's back in for Early Access. If you load up with dynamite you can blow holes in the landscape :)
Theres a lot of issues with deformable terrain and we can see why many games omit it... as the height of the terrain is recalculated, the mesh needs to be remade, this can cause a few frames of lag, which can be frustrating in an FPS as the camera will take all the input over those frames and have you staring in a different direction when the framerate is back to normal. Even on high end machines, because of the way Unity re-calculates meshes, it's all done on the main thread. So we used some magic tricks to bring the lag time down.