Crydev.net now offers the CryENGINE 3 Free SDK, the As promised non-commercial game development toolkit using Crytek's game engine (thanks The Grifter). Here's the outline of what you can and cannot do with this:

CryENGINE Free Use
You can use CryENGINE 3 for free in educational facilities, even if you are charging tuition. We have always offered our engine for free to educators, but now individual students can also freely download the engine and use it to learn about real-time 3D development.

CryENGINE 3 is also free for non-commercial use; if you are distributing your game or application for free (and not charging for your work in producing it, whether directly or indirectly), no additional license is required.

CryENGINE 3 Independent Developers Platform
We want you to make games with CryENGINE 3 that people will want to play. We hope that your work will lead to a product you can commercialise. If this is the case, before you can sell your work or your game, you must seek a development license for CryENGINE 3.

CryENGINE 3 for Independent Studios, Free To Play Games or Downloadable Games
Crytek has attractive options for smaller games built with CryENGINE 3, with shorter development timescales. If you want to move your game onto platforms other than PC, or you need access to CryENGINE 3 source code, please contact Crytek to find out more about our licensing for Independent Studios.