Ambient occlusion

Scene ambient occlusion is off by default in UDK, and generally speaking just turning it on will be enough to get a nice result. Indirect lighting is not off by default. The main distinction is that indirect light is a fill from light bounces, adding secondary light onto surfaces not lit by direct lights or key lights. Ambient occlusion deals with the blocking of light from the sky (the indirect light source and any bounced light from it) by objects in proximity to each other.

Think about it like this. If you hold up one hand, with your knuckles facing a lamp, you'll still see some light on your palm (unless the lamp is weak and you are in a huge empty room). The light on your palm is bounced light, or indirect lighting. Now, if you lift your other hand too, so your palms are facing, you will notice the palm surfaces get darker and darker the closer your hands get. The indirect light is occluded. So ambient occlusion is the occlusion of the sky light (usually thought of...