I had that happen dozen of times. It's doesn't happen often, thankfully.
Sometimes shit goes down when all the models start de-rendering, shadows disappear and cause an enormous FPS drop. Everything looks like it's on lowest possible settings.
I have made a few screenshots of how it looks like.
http://steamcommunity.com/id/misharoman/screenshot/577904829507758818
-You see that arms are visible through clothes, while clothes themselves are just a low quality texture; house to the left isn't rendered while trees are... well, I don't have to comment on that. Everything lost its shape.

http://steamcommunity.com/id/misharoman/screenshot/577904829507756623
-I'm inside the house that was to my left. It's completely un-rendered. My mask that's supposed to be a model is just a hanging texture.

http://steamcommunity.com/id/misharoman/screenshot/577904829507754214
-Just another picture. It's when the de-render went going down.