Unreal Engine 3, not 3.5. The Engine can do way more than it did in Gears as that was the first game released that uses Unreal Engine 3. Just look at Unreal Tournament 3, Bioshock, Mass Effect, etc. Usually when Epic makes a jump to .5 for their Engine they do something substantial like improve the lighting and physics (Unreal Engine 2 to 2.5) or networking (Unreal Engine 1 to 1.5). Since Gears 2 just look like better textures and polys I don't think it's 3.5
LoserMike
Well it is 3.5 b/c they have added many new features such as: soft body manipulation, vastly improved water dynamics, increased density in volumetric lighting and of course improved texture manipulation.
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