For a low-budget film, the use of a game engine like DOOM3, Half-Life2, S.T.A.L.K.E.R., TRON2 or UT2k3 - with all their free tools - becomes a viable option.
What would you need?
1) The game and a video card capable of handling all the effects. Some games will only ship with support for Microsoft's DX9 graphics library. id software tends to support both OpenGL and DX9; however, OpenGL is falling behind DX9 so some features may be unavailable.
2) Two character models: one low-rez and one high-rez. These are created/rigged/animated in various software packages and is a separate lengthy discussion. However, the high-rez model is used to create a "normal map" on the low-rez model. Normal mapping is a visual trick also requiring a newer video card (tho you don't need one to create the map). The tools for creating normal maps are free. Also, freely-available software to create these models can be found online.
3) A level-editor for the game. This is the 3D software created specifically for the creation of game worlds. These are free tools and available with the game. Half-Life2 will use a popular editor called "Hammer" (formerly "Worldcraft"). DOOM3 will probably use a new version of Radiant. The level editor would be used to create "bluerooms" so that the model could be "filmed" walking in an environment which allows for easy compositing.
4) Game cinematic tools. Unlike normal filming, games have the option to "recam"". What games already have is the ability to efficiently "record" the game play. This is useful for online game tournaments and to share a particularly good "fragfest" with someone later. Also traditionally available is the ability to be a "Spectator" and either view the action from a stationary position or follow a player around. Needless to say, dumping the screen image/video to a recording device didn't require much.
With the ability to change "Spectator" (or camera) position, and then "replay" the game, the term "recam" was coined. So if you don't like a particular angle, or want several angles, you never have to shoot another "take" - you simply replay the stored game.
Until recently, capturing scenes from games has remained rather crude. That is changing and we can expect a wide array of cinematic tools built into the coming games.
5) Audio tools. Unfortunately I can't really speak to this issue, other than to say that Trent Reznor (of NIN fame) was, until recently, working with id on DOOM3. As part of his involvement, it's been reported that a number of powerful audio tools were developed to control level music/sound. The assumption is that these tools will be available with the game.
Additionally, John Carmack (co-owner and lead programmer)'s wife heads a company heavily involved in Machinima, so one might expect some excellent filmmaking sound tools for DOOM3. Hopefully, the other games will be equally supportive. I do know that Half-Life2 includes Automatic Lip-Synching capabilities. I believe this is also a real-time feature. In other words, for multi-player online games (using broadband), someone speaking into a PC microphone while playing will appear to be speaking in the game. I would assume voice talent could be speaking during a game-recording session into both a PC mic and another recording device (perhaps a Nagra!).
6) All the rest: digitized footage, a compositing application, etc. are all familiar tools to low-budget filmmakers and need no explanation here.
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There will doubtlessly be limitations. Good models can be found for the current crop of popular games, but the new models raise the bar substantially. Already amateur modelers are voicing concerns about whether or not they'll have the skill to meet expectations.
Another limitation would be match-moving. I doubt that this is something which could be done easily or with much success. However, a low-budget film will doubtlessly have bigger issues to deal with than this.
Well, that's about it.
You can find both images shown above online at:
http://www.doom3.com
and
http://creative.gettyimages.com/imagebank