1) What is a game engine:

It varies between engines but in general it is a set of tools and libraries that help you make your game.

2) does it restrict my customization ability and animation ability?

Possibly, it varies between engines, general purpose engines are far more flexible than more specialized engines.

3) Is a game engine needed?

No, it is not strictly needed, if you don't use or write an engine you still have to write code for the low level parts of the game but it doesn't necessarily need to be cleanly separated from the game code (for larger games it is a good idea to keep the low level code reasonably separate though and then you would get an engine of some sort either way)

4) Could i use a pre made game engine and still get the results i want ??

That depends on what results you want and how much you are willing to spend on the game engine. most cheap/free engines today can match or even surpass the technical quality of the games released for the PS3 and xbox360 if you put in enough effort.

Also, there is no such thing as a small mmo :)

Massively Multiplayer implies that you can have thousands of players (or atleast several hundred) in the same game instance at the same time.(1vs1 is not massively multiplayer)

it seems you have a few-well-confused ideas.

I will not try to tell you to give up with mmorpg, you'll learn your way, but let me explain a bit of terms:

game engine: is a tool to make games. It has a lot of features all involved in make games. See Unity or GameMaker. It's not a magic click-to-make-the-game tool, anyway. You have to learn how to use it, but usually it gives you a visual environment to build your game.

library: using a library involves to write code your own. A library can gives you an API to make things easier, but once again you have to learn how to use it. A library usually covers a specific aspect of the game development, such as rendering the scene, load models, deal with assets, manage physics and so on. Probably you'll end to use a bunch of different libraries to reach your goal. And, obviusly, write your c++ code to keep all together.

compiler: it has nothing strictly to do with game dev. It is needed to convert your code into something that your computer can execute, otherwise your code remains a strange kind of text file.

Some game engines allow you to create a game without writing a single line of code. So they can take over the entire job of a compiler. Others are more limited.

Not to be buggy or annoying here but what is the name of such a 3D game engine?

Let us assume that Scripting is very much like coding, then:

• Unity3D you will need to code
• Torque 3D/2D you will to code
• UDK you will need to code
• Ogre3D you will need to code
• JMonkey you will need to code
• Leadwerks you will need to code
• and many others

In fact I know of no 3D game engine where people can create a game without ever coding.

Perhaps Blender is such an engine?

Please enlighten me with game engines where no coding/scripting is needed to make a game.

Edit:

Unless you mean coding is having access to source codes and only working from the compiler itself?

Not to be buggy or annoying here but what is the name of such a 3D game engine?

I Agree.

The only things that comes to mind is didactic game creation tools like Kodu Game Lab; usually used to spike interest on children...

But even kodu could be considered to use some "programming".

because it helps render all the environment and characters during gameplay and tell the objects and characters what to do or is that part of programming the game and not the engine??