http://www.tweakguides.com/UT3_5.html
Screen Percentage: This slider controls the amount of screen space to render the game world in, and the lower the screen percentage, the smaller the game image will be on the screen. However, what actually happens is that the game takes this smaller image and by default upscales it to fill your screen (if UpscaleScreenPercentage=true in your UTEngine.ini file - see the Advanced Tweaking section). The result is that the in-game image becomes noticeably more blurry the lower the screen percentage setting is taken, and in return you gain more performance. In practice this is very similar to running the game at a specified proportion of your current resolution. For example a 50% screen percentage on a 1280x1024 resolution gives the visual equivalent of running at half the resolution. The difference is that your main menus and in-game HUD elements (graphics and text) will not be reduced in resolution, which helps legibility, particularly for people using LCD screens at native resolution, and the setting can also help those already running a low resolution, or those who want to only slightly decrease their resolution. To observe the difference for yourself, you can see an animated screenshot comparison by clicking this link:
UT3_ScreenPercent.gif (553KB). If you want the best image quality don't reduce screen percentage below 100, unless you're truly struggling for FPS. If you want to decrease this setting below 50%, use the ScreenPercentage setting in the Advanced Tweaking section.
