The battle system is still considered an ATB system, complete with time flowing by as you input commands. However, the actual means of input has changed a bit and, according to Tsuchida, will now allow for more control options. You'll be able to, for example, select between carrying out a simple slash, or charging and then slashing. Some characters will be able to combine magic with standard attacks. And all of this is somehow connected to a new animation system that will blend individual motions to result in a single smooth motion.
Final Fantasy XIII's battle system may share a few points in common with the Final Fantasy XII system. Rather than a standard encounter-based system where battle begins with the allies and enemies in a face off, Tsuchida suggested that FFXIII's battles will begin with the player noting, "Oh, here's an enemy."
Players will be able to change the battle conditions to an extent. Tsuchida gave the example of a player considering what can be done in order to create a winning situation for an upcoming battle.
This doesn't mean we'll be getting an evolved version of the FFXII system either. Toriyama stated that the FFXIII battle system will be something that's not quite encounter based and not quite seamless. Players will have a new way of getting into fights with enemies.