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.