To clarify in point form:
1) It's an updated version of the Unreal Engine... past Gears of War 2... so it has a few extra features like global illumination, flocking for large masses of AI, Ambient Occlusion...
2) Your players don't need to own anything... just download your game and play.
3) You DO NOT get source code of Unreal Engine 3... so you can't play with the C++
4) You CAN NOT use assets from any other game in it... normally Epic doesn't mind using Unreal assets in Unreal Tournament 3... or UT3 in Gears of War -- etc -- but you CAN NOT do that with the UDK. Everything needs to be from you or someone who lets you use their stuff.
5) You ARE allowed to sell your game... though after 5000$ of revenue, Epic takes 25% of revenue.







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