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Compare the inside of a rendered box with only the front open which would appear quite dark inside and have gradually brighter inner sides and bottom towards the opening with global illumination turned on since this is being calculated. With this turned off all inner sides including the bottom would appear the same intensity all over which give a flat impression.
Note that this is close to shadow quality but generally renderns more subtle low contrast changes. Shadow quality in this case would in many games refer to the shadow that said box cast on the ground.
Ray tracing is another story. Photons are calculated for path, distribution, reflection etc. and can render high visual fidelity (photo-realistic images) at high computational cost. First Pixar movie to use ray tracing extensively was Cars from 2006 .. go read and prepare to be baffled by numbers and rendering times from not too long ago. Cheers!