Previously, the player utilized an AABB (axis-aligned bounding-box) collision system, because before smooth terrain was added, AABB was lightning fast for block collision testing. Unforunately, this meant that the player's Y-coordinate was always snapped to integer coordinates when on the ground, so the player would basically still be walking on 1x1x1 blocks. However, now things have changed, and War of the Voxels now uses BEPU for all of its physics. This means that the physics now properly model the terrain! Yay!
Check out this demonstration of the physics!