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Light sources have a physical size and are not just points. This means that occluding/blocking the light rays coming from a physical source do not result in a receiving surface being either fully lit or fully in shadow, but rather from fully lit, gradually fading through the so-called 'penumbra' to being fully in shadow (known as 'umbra'). Shadows with hard edges do not look physically correct, and while many might accept them, the visual improvement from having realistic soft shadows adds a lot to the atmosphere of a scene.
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