In this paper, we present some recent advances in realistic surgery simulation including novel algorithms for simulating surgical cutting and techniques of improving visual realism of the simulated scenarios using images. Simulation of surgical cutting is one of the most challenging tasks in the development of a surgery simulator. Changes in topology during simulation render precomputed data unusable. Moreover, the process is nonlinear and the underlying physics is complex. Therefore, fully realistic simulation of surgical cutting at real-time rates on single processor machines is possibly out of reach at the present time. In this paper, we present a hybrid approach to the simulation of surgical cutting procedures by combining a node-snapping technique with a physically based meshfree computational scheme, the point-associated finite field (PAFF) approach, and empirical data obtained from controlled cutting experiments. To enhance the realism of the rendered scenarios, we propose an innovative way of using images obtained from videos acquired during actual surgical processes. Using a combination of techniques such as image mosaicing and view-dependent texture-mapping, we have been able to achieve excellent realistic effects with desired tissue glistening as the camera position is changed. Realistic examples are presented to showcase the results.