Recs.
Updated
Unreal Engine 4 is the sucessor of Unreal Engine 3. At this time, UE4 is free for everyone, and the source code is open-source.
SpecsUpdate
Pros
Pro A visual scripting system for non-coders enables quick prototyping
Blueprints are authoring tools designed for non programmers so designers and other team members can help tweak and prototype. UE4's Blueprint scripts resemble flowcharts where each box represents a function or value, with connections between them representing program flow. This provides a better at-a-glance indication of game logic than a simple list of events, and makes complex behaviors easier to accomplish and games a lot faster to prototype.
Pro AAA-level games support built-in
This is the engine from creators of Unreal Tournament, used in dozens of AAA titles. By utilizing things such as a substantial community of developers who makes AAA-level games, a rendering engine that is capable of quality required by VR systems (which is 90FPS 4K picture quality minimum), built-in support for cinematic scenes preparation a realistic physics engine out of the box, photo-realistic light, shadows, occlusion and reflections that are also included as well as (since v4.12), it has VR support for the level editor itself, which means you can actually edit your level in illusion of being inside it. To top all of this off a full Unreal Tournament game with source code is included with everything, free of charge as a prime example which can be used as an inspiration/self-teaching material.
Cons
Con Editors function may not be used in final product
This is a BIG problem.
Example: You want a SIMPLE way for your users to make or edit maps.
Forcing your users to download, install and learn Unreal Engine is not an option.
It's way to complex for such a simple task.
You are not allowed to expose Editor function ingame, since this violated the Unreal Engine License agreement.
So you are left to re-implement all the Editor functions yourself AND these functions have to be implemented in a different way they the original Unreal Engine implementation.
Con Certain actions are slow
Compared to other engines, UE4 seems to perform various actions considerably slower. Actions like starting the engine, opening the editor, opening a project, rebuilding shaders, updating references, calculating lightmaps, saving projects, etc take long enough to get irritating and end up wasting precious development time.
Con Unreal Editor isn't 100% stable, can crash from time to time
Be sure you have a enough amount of RAM, because Unreal Editor is very RAM dependent.
Con Poor documentation
Most of the "documentation" for code is actually just automatically generated from the source. If you're interested in knowing how things are supposed to work, you must either go to their answers site or pay for UDN.
Often their examples won't even compile, since they were written for now outdated versions.
Con Slow
Compared to other engines, UE4 seems to perform various actions considerably slower. Actions like starting the engine, opening the editor, opening a project, rebuilding shaders, updating references, calculating lightmaps, saving projects, etc take long enough to get irritating and end up wasting precious development time.
Recommendations
Comments
Flagged Pros + Cons
Pro Dynamic global illumination with voxel cone tracing
Voxel cone tracing is a similar algorithm to ray tracing, but uses thick rays instead of pixel thin rays to be able vastly decrease the amount of computational power needed.