When I first started with UDK I had a lot of confusion understanding the difference between textures and materials.
There are few fundamental distinctions between textures and materials. For example, you cannot apply a texture on a static mesh or BSP geometry. Textures have to be a part of a material. The material is what you would use to texture your environment and apply to Static Meshes.
Here are the differences between a texture and a material in UDK.
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UDK: Difference Between Textures and Materials
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