It depends on a lot of things. You often start with defining a units in your modelling tools, which can be easily handled, e.g. 1 unit = 1 m. But the tricky part is, that you just can't model everything in realistic scales and convert it to your game, because due to different factors (FOV,camera pespectie, texture resolution, detail size etc.) your world will look different in your game. Therefore you often need an artistic scale-reference point, often a character. The human brain determines scale by comparing objects with nearby objects where it knows its scale and a human character is a very good reference. So many artists think more in "this building is 5 characters height " instead of "this building is 10 m height", the visiul perception is more important than realistic scales.

If you have an existing engine (UDK), you already have a reference character and you can use it to define your units in the modelling tool.

If you write your own engine, I would start with a reference character in a modelling tool, scale it to some plausible size (e.g. 2units height), import it into your game, tweak your game until it looks ok and model everything around this reference character.