Epic has revealed commercial terms for licensing the Unreal Development Kit - the free version of Unreal Engine 3, originally released for non-commercial use (in education, for example).
If you're selling the software you make using UDK, Epic takes a substantial 25% royalty on all revenue after the first $5000, as well as charging an upfront fee of $99.
If the software you produce with UDK is for internal use only - the example given is an application for employee safety training - you'll pay $2500 per developer using Epic's tools.
In Epic's example, an indie game developer that releases a game made with UDK through digital distribution would pay Epic €2500 on the €15,000 they earn in the first calendar quarter (zero per cent on the first €5000, and then 25 per cent of the next €10,000). Then 25 per cent on all subsequent sales.
That's a hefty cut - but this is not how major publishers and developers license Epic's technology. Such companies would negotiate a licence for the full version of Unreal Engine 3 (or one of its predecessors) with Mark Rein and co. The terms of those licences remain confidential, and probably vary from customer to customer.