How would you make a city environment for a game?

So I have been looking at how games are made and I have watched a bunch of videos where people make 3D faces and buildings using Blender (really awesome) and I thought how would you make a city for a game? What is the process of making a city like in Tom Clancy's The Devision? Would you make each indervidual building in a program like Blender and then import the buildings into an engine like CryEngine of UDK? Also the city landscape that the buildings are on top of you could say are not flat so how do you build the terrain as well?

Basically I love games and I want to know the process of making a scene. Haha Thanks in advance.

You would make all the components, and then use a terrain editor to make the terrain, and import the components and place them where you want them.  

http://www.youtube.com/watch?v=VtMbkdH4cJQ