From the website:
The manual modeling of urban environments with existing solutions is a time-consuming and expensive process. With the CityEngine, this content creation process can be accelerated by magnitudes, eliminating the need for multiple software solutions and manpower – resulting in lower production costs.
Use of Procedural Content Generation Methods
The papers on procedural modelling of buildings and cities listed in the external links below discuss the techniques used by CityEngine in detail.
PCG Wiki References
Procedural Modelling of Buildings - Pascal Müller, Peter Wonka, Simon Haegler, Andreas Ulmer and Luc Van Gool.
Procedural Modelling of Cities - Yoav I H Parish and Pascal Müller: The paper much of the Subversion city generator is based on.
Buildings and Cities: Academic Papers and Projects