The game engine is practically is like the brain of the game, it manages all the factors that allow the game to work such as the rendering engine (allow the graphics, models and textures to load), sound, scripting, animation, ai and physics engine. Without the game engine none of the game would be able to load and be playable, like a gun with no bullets.
The top tech engines at the moment seem to be the RAGE Engine, Unreal Engine 3, Gamebryo Lightspeed, CryENGINE, the naughty dog engine, Dead engine and Infinity Wards own engine. Some of these are used across platforms and across companies but Infinity Ward seem to only use their engine for the call of duty and modern warfare games.
The advantages of buying into some kind of engine tech would be that so many games use the same engine your most defiantly to make your profit back quickly, the disadvantage would be that as games and consoles develop so do the engines so an engine you invest in could live for 4 years or 4 months I guess it all depends on the life expectancy of the engine.
Subtractive and additive seem to be the effects of lights inside games that are controlled by the engine. Additive is made up of the colours red, green and blue (RGB) and they cause lighting to be more white than black, more based on outside lighting as more colour is added, the result is lighter and turns to white. Subtractive is made up of colours magenta, cyan and yellow and these cause lighting to become darker in areas so the more colour that is added the darker the light force becomes, eventually turning to black.
The main issue concerning the compatibility with next gen consoles and engines is that games designers will want to push things more and more and the engines will have to keep up with this, more time and money will need to be spent to keep these two alliances intact. The fact that we can do so much already is amazing, the human being has developed so quickly because we want more and more that it affects everything, even computer games.