This recipe covers the basics of making a Landscape, which is a newer alternative to using the Terrain tool. It features a more painterly tool set, and can also import Heightmaps from software such as Vue or Terragen. Heightmaps are black and white textures where light tones influence a surface to push it upwards, and darker tones effect it less. Our goals will be to model a simple Landscape asset, and paint texture layers on it. Afterward, we'll scatter trees and rocks across it using the Foliage tool (which isn't limited to foliage).
Open UDK fresh, and from the File | New menu load the map template Midday Lighting. You may want to read about the technological basis for the Landscape tool at http://udn.epicgames.com/Three/Landscape.html.