how does collaboration work in UE4 exactly?

For example how would people work together at the same time and have updates from different developers running on a server or something along those lines.

Game teams use a source control system to collaborate. There are tons of options out there, Git, Mercurial, Subversion, Perforce, the list goes on. We currently have support in the editor for Perforce and Subversion, as they both handle binary files really well - and games have tons of those.

But you don’t need to use either of those, but if you do - it will help do things like merge our custom file formats when multiple developers edit the same files.

Cheers,
Nick (Epic Games)

And now that every asset is a package just got even easier to work in collaboration with other artists and programmers.