The Editor is in real time. It just turns the footage into a video using an encoder. On PC there is an option to enhance graphics but all it does is add extra reflections, and has most effect if you play at low settings. If you play at high settings you barely see a difference.
AND ABOUT THAT FANMADE TRAILER CLAIM: yes, editor only captures 720p on console, I can forgive that - but the editor has EXTRA passes and pumped up graphics when rendering, higher quality because it has time because it's not realtime, it's recording and slower per frame rendering - it does NOT look like that in gameplay. =)
Rockstar's trailers are very rarely enhanced in terms of graphics. NPC's and props are another story, but definitely not graphics. In fact, GTA IV's first 2 trailers looked horrible compared to the final game, GTA V's first two trailers also looked worse than the final product, and many criticisms were had when some screenshots first released that it looked like IV.
R* is probably one of the only devs who uses real time or semi-real time footage on their trailers.
editor adds extra passes, did in IV, does here, too, it enhances the image, smooths, uses a few extra instructions in shaders that are only for editor.
Their trailers are rendered on the editor very similarly to how we can make videos in the game.
I actually think IV's first two trailers looked better in a way of my own preference, but I do agree, the end result does look better objectively, I just really liked how certain things looked early on, especially niko himself.