I doubt you can distribut commercial games with this on PC... but it's just my opinion and open for study is better than not there at all ^^

I'm pretty sure the Forza engine is Microsoft's as is the engine for Fable, then there's Halo Reach's engine which may or may not be owned by Microsoft.  In fact isn't the engine that drove Halo Wars there's too.  I'll not go on but there are plenty not owned by third parties that were custom built for some games.

Microsoft don't rely on third parties at all for engines, third parties rely on third party engines.  No multi format company is going to goto Microsoft or Sony for a engine to run across both those manufacturers consoles for obvious optimization reasons. 

lol all of you taking PullusPardus' comment seriously, dude obviously doesn't know what he's talking about

microsoft games have their own engines except for gears of war and  kinect adventures which both use the unreal engine

i'm betting you actually don't know what a game engine is.

@replies. didn't Fable games run on the Havok engine? , it says so when you start the games, i don't remember the forza one though.

That's your response? Seriously?

Well let me tell you that you'd lose that bet - I've actually made one from scratch just so you know

you wanted a response and you got it , don't complain.

They do and it is called SDK - Software Development Kit. When a company is allowed create games for a console the company usually recieves the manufacturer SDK. However, what most of the companies do is to develop their own SDK using consoles SDKs to develop multiplatform games since a manufacturer SDK works for only one console.

That's just for physics, not a game engine.  A lot of games use it. 

Microsoft made XNA for small-time developers for usage on XBLIG and Windows Phone 7. Its an easy example of a company offering an engine to pretty much anyone.