It's a remake in the style of how Shadow of the Colossus, Demon's Souls and (likely) Dead Space are. In that it's completely remade into a new graphics engine with new animations and physics, new lighting, some new gameplay elements and some re-recorded audio, but the story and level design all remain fundamentally the same.
I wonder if as an industry we are lacking terms to differentiate these types of projects, as it's clear this is much more than a remaster but isn't a remake in the way that Final Fantasy VII Remake is.
I kind of see 4 tiers in this:
- Remaster: upgraded resolution and/or frame-rate, fixes to graphical and/or gameplay bugs, potentially upgraded textures and lighting, but same graphics engine with no changes to story or gameplay.
- Rebuild (?): same game made into a new graphics engine, changes to animations and physics, completely new lighting system, some changes to gameplay but none to story (ie. SotC, Demon's Souls, TLOU, maybe Gears of War: Ultimate Edition and the original Resident Evil: Remake can fit here as well).
- Remake (?): same as above but completely modernising and reworking the gameplay and level design, allowing some changes to the story but mostly following the same plot (ie. remakes of Resident Evil 2, 3 and likely 4).
- Full-on remake (?): a completely new game re-made from the story, characters and ideas of the original. The essence and spirit of the game may remain but this is essentially and entirely new game in terms of gameplay, level design and plot beats (ie. Final Fantasy VII).
I'm not tethered to the names of those tiers necessarily, but that's how I've kind of broken it down in my head these past few years to help me distinguish between what each type of project is and what to expect.