Crysis 2 is the current standard for high-quality graphics in video games. No other game looks so smooth, so colorful, so... ultra-real. German developer Crytek has built their reputation on PC game technology to the limit, and the CryENGINE 3 graphics engine they used to make Crysis 2 might be the most powerful tool for creating 3D video game graphics on Earth. As of yesterday, it's also free for anyone, yourself included, to download from Crytek's website here.
Most popular 3D engines, like the ubiquitous Unreal Engine 3, cost lots of money to license. Exact figures vary and are not usually disclosed, but tend to hover between $100,000 and $1 million or more, depending on who in particular wants the license. Many game companies make more money from engine licensing than they do from their actual games. There's a free version of Unreal Engine available for download as well, but it lacks some of the features of the full licensed version. Crytek's newest offering, by contrast, appears to legitimately be their entire engine, meaning that just about anybody with a tremendous amount of time and computer skills can make a professional quality game with it.
Of course, they'll only be able to make the game. The free versions of both Unreal Engine 3 and CryENGINE 3 are non-commercial; meaning that one can use them as much as they want for free, as long as they don't sell anything they've made. That's when the large licensing fees kick in. So, Crytek isn't making any money directly from giving away CryENGINE.
So, why do these companies go through the trouble of giving away their powerful proprietary software?
Because they need to. Graphics engines are insanely complicated, and their effectiveness is directly tied to the skill of the artists or programmers using them. Having lots of people use an engine for long periods of time develops a pool of technicians skilled with it, whom in time will make the engine itself appear to be better by making better looking games with it. When the engine appears better, more companies will want it and be willing to pay big money to license it.
Thus, what Epic Games and Crytek are doing is pretty sensible. They give away their insanely complex engines for free, allow those with the proper talent and motivation to develop their skills and come up with original ideas for how to use them, then utilize that pool of users for promotion and as a recruitment pool for future employees.
Think you have the chops to jump in that pool? Then grab your trunks and prepare to not go outside for a while—it's CryENGINE 3 time.