That's a bit of an ambiguous question. Are you asking the historical record, the tactics or technology involved that's not necessarily mentioned in the historical record, or questioning the veracity of the account itself? They're all good questions so I'll try to cover at least some aspects of all of these.

The historical record is pretty barren. Sima Qian mentions the battle in "detail" (using the word quite lightly, mind you) in two places - Shi Ji's Chronical of Xiang Yu and Shi Ji's Chronicals of Gao Zu (Gao Zu Ben Ji). They basically say the same thing: Liu Bang led a coalition army of five nations consisting of 560,000 men eastward and occupied a fairly undefended Peng Cheng (Xuzhou, Jiangsu today), the capital of Chu. Xiang Yu, being in the north fighting the Qi, took 30,000 of his crack troops and fled down south, attacking from the west from Xiaoxian, just across the border in modern Anhui, and attacked by surprise from the rear of the Han army, routing them by noon, killing around 100,000, and surrounded the remaining force against a local river, and the retreating army lost another 100,000 in the river, until a timely sandstorm scattered the 30,000 and allowed Liu Bang to escape. This is unfortunately the most detailed account, and it's not much to go on. Do note that Sima Qian is not entirely contemporaneous to the events, writing about 100 years after the fact. Gao Zu Ben Ji effectively only adds the fact that the main battle was immediately fought with the river to the east, which, with the encirclement noted earlier, would mean that the troops were cut off from their escape path.

Chinese historians generally take this account at face value, and have pointed out in various literature and this handy YouTube lecture, if you speak Chinese that the account is plausible. The key points mentioned are that Xiang Yu was able to attack from what would have been the natural escape route to the west of the city, instead of the north or east as would be expected, that the attack was a surprise due to the speed and direction and possibly attributable to Xiang Yu's use of cavalry as opposed to Liu Bang's infantry, that Liu Bang's forces are not unified as they are a coalition so they had little control, and they were garrisoned and not prepared properly for a fight period. There's some discrepancy as to whether Xiang Yu had word of the impending fall of his capital and rushed back while Liu Bang's troops have yet to occupy the garrison in full as the Chronicles of Xiang Yu states that the first engagement happened outside of the city ("项王乃西从萧，晨击汉军而东，至彭城" - stating that Xiang Yu at Xiao Xiang in the west, attacking the Han army in the morning to the east, all the way to Peng Cheng) or whether Liu Bang had already garrisoned Peng Cheng before Xiang Yu arrived ("汉王以故得劫五诸侯兵，遂入彭城。项羽闻之，乃引兵去齐，从鲁出胡陵，至萧" - the King of Han with his adjuncts went into Peng Cheng, and upon hearing this, Xiang Yu went out of Shandong to Xiaoxian). It may very well that the accounts do not actually contradict each other, that the troops under Liu Bang were in the process of garrisoning, but again, since this is pretty much all we have, it's not a whole lot to go off.

However, because it's well known that Xiang Yu did indeed have some crack cavalry at some point, cavalry in Chinese warfare prior to this was documented, and the requirements of a surprise attack would involve fast movement, the well-worn conjecture that he effectively led 30,000 cavalry against an unprepared force of infantry. This again is effectively conjecture, as the historical account uses the term "精兵" merely meaning crack troops or well-trained troops, but if one takes the result at face value it would be a sensible implication.

It would be worthwhile to see the map as to where Xiaoxian is compared to Pengcheng, now Xuzhou.

Did it actually happen as described? Due to the paucity of sources it's difficult to say. John Keay thinks that the 560,000 number is exaggerated but outside of that, you won't find too many critical looks at an event that's essentially poorly documented.

But if you put the pieces together in a way it does make sense. Even if Liu Bang did not have 560,000 troops, his numbers certainly outnumber Xiang Yu's, but it would almost certainly be a coalition force because that's stated explicitly in the Chronicles of Xiang Yu, not to mention that looking at his situation as a whole he didn't have 560,000 troops of his own or even close to that (he had 100,000 the last time the two met in battle). Xiang Yu was able to rush 30,000 troops from what's today Shandong, due north and certainly a few hundred miles away, to a spot due west and in the retreating path of the coalition, before the forces were garrisoned or properly garrisoned - as no siege occurred, the troops were in a state of mobilization, and the later Chronicles of Han (Han Ji, by Ban Gu, another 100 years after Sima Qian) have mentioned that the troops were disorganized in Peng Cheng. He was able to catch them by surprise and if it was indeed a surprise cavalry charge on a coalition army with individual commanders and their own agendas, with many bodies of water to the east (see map), and their natural escape route to the west cut off, and possibly encircled by Xiang Yu's forces over the course of only a few hours, even if the true numbers of casualties were not the tidy 100,000 + 100,000 it's possible that a significant rout occurred, just not with any exact numbers we can ascertain.

Unfortunately all the maps that show the old names are pretty inadequate and for some reason this particular one seems to be colored in crayon. And the tributary that claimed the 100,000 men trying to get across no longer exist on maps, but these maps from CCTV accompanying their expert lecture series on the topic show where the bodies of water were that resulted in the encirclement.

While we should look at these numbers more critically, it's difficult because essentially the most contemporaneous source is Sima Qian and he has his numbers down pretty tight. Also, considering that lopsided routs that are partly true and partly exaggerated are not actually completely unheard of - Agincourt, Crecy were both battles with lopsided ancient estimates and revised modern numbers still show an significantly smaller but still existing imbalance, and far closer to us than 205BC - not to mention that in 530 CE the Liang dynasty general Chen Qingzhi supposedly went against a force 100 times his size and defeated it, goes to show that perhaps the story does not rest in the actual numbers but the end result.

The vague and inaccurate nature of Chinese chronicles have been noted by a lot of observers - hell Arthur Henderson Smith devotes a whole chapter of his book Chinese Characteristics on this very issue, albeit in a really patronizing and to modern readers, racist sort of way. There is always the question as to where Xiang Yu got all the cavalry when he didn't have any at Julu two years prior that will probably remain unanswered, but it's all we have.