From Second Life Wiki
Andrew Meadows andrew at lindenlab.com Fri Apr 13 07:31:56 PDT 2007
Havok has a per-prim property called 'restitution' whose range is [0,1]. Basically it is a measure of how much energy is conserved on a collision. A restitution of 1 would be complete conservation of energy and 0 would be none. Each object's restitution contributes during a collision, so a bouncy ball still won't bounce high on a soft floor.
The allowed restitution of the various materials in SL are kept low for stability purposes. High restitution combined with LSL actions might have modes where unlimited energy could be pumped into the system. There is a large amount of work to do before we'll be ready to provide more liberal restitution settings.
Havok's objects are all rigid bodies, so every collision is "instant" in the sense that the object does not flex. The newer versions of Havok have "soft body dynamics", although I believe it comes with a significant performance penalty, more than we would want to incur at this time.