Gamasutra has good general info on all aspects game development; if you create a profile you can sign up for their newsletters, which are a good way to keep a finger on the pulse of the industry
UDK is a level editing and scripting system built on top of the Unreal Engine. High end graphics and lots of other cool stuff. I don't have personal experience with this one. Free to use, but I believe you will pay a royalty if you ship a game for money.
CryEngine is possibly the ultimate game engine, certainly the best-looking PC graphics (and highest licensing fees for commercial use!) There is a free version available from crydev.net. I haven't used it.
GameMaker is a popular game creation and prototyping toolset that can be used by non-programmers, though there is also a scripting interface. I haven't used GameMaker, but I've been impressed by what people can do with it.
I've only scratched the surface of what's possible, but
there are lots of demos out there with source code you can look at, such as:
For art creation, the most popular industry tools are Autodesk 3D Studio Max and Maya for modelling and animation, and Adobe Photoshop for creating textures. These are all available in student or free trial versions. Alternatively Blender and Gimp are open source modeling and texture creation tools.