Previously, the Engine worked very much like Garry's Mod. It was the standard source engine setup. Entities, client, server, user commands, prediction, hammer.
What became obvious over time is that we wanted more control, over the entire game loop. We wanted to make things more real-time, less baked, less compiled, and faster to iterate and make prototypes.
We did this in Garry's Mod when we added the sandbox mode, which lets you spawn in models and change their colour and materials. It also let you place lights and particles to construct a scene.
In a lot of ways this new system is an evolution of that, except it's the engine.