So it looks like Call of Duty is not being used to train the terrorists, it's being used to train the FBI and other agencies in the U.S…Just kidding dear readers! In all seriousness though the Unreal Engine is being licensed to the FBI, among other government agencies. This software is going to be used to produce training programs, or “Serious Games” as the Intelligence Advanced Research Projects Activity calls them.
Along with the FBI, who will be using Unreal to develop a mulitplayer crime scene in which the agents can do their training missions, the US army will be using the tech for an anesthesiology training application for their medics (how you train for that using a game, I have no clue), and as a visualization tool for weapons researchers.
The main question now is, why can't we just fight wars using video games? I mean something like a Tournament similar to what MLG does. World War Games: Settling your disputes one Halo match at a time.
Source: BBC