It is usually expected that all the work included in the demo (code, visual art and music) is originally created by the demo authors (or donated by friends / collaborators). Most of the demo is also expected to be original material, but it is ok to reuse some material from demo to demo (audio samples, textures, models, animations, shaders) as long as it is used in a unique way.
Demos and intros have to run in real time on the target machine without downloading new material on the fly. There used to be fairly generous size limits for the "demo" category, whereas the "intro" categories vary among 64kb, 40kb, 4kb, 1kb and even 256 bytes. They are meant to run autonomously, without needing user interaction. Demo competitions usually include other categories such as standalone music, art of various styles (pixel, 2d, 3d, procedural) and "wild" demos which are the exception in that they are pre-recorded videos.
As with any form of art, there are always people that ignore or challenge some of these rules and assumptions in one way or another, and a few do so in memorable ways, but that's another discussion.
I'll add that there's quite a bit of controversy over the 2nd place demo this year, "DEMO2" by ekspert. It centers around the use of Unreal Engine 4 as the engine the demo was coded in (and a few other assets like animations "borrowed" from elsewhere). This is all normally very frowned upon in competition.
It's brought up a bit of an existential question in the scene however, it's not uncommon for teams to use their own engine, or engines coded by other teams, and assets of various sorts are frequently borrowed (but heavily remixed) and used in demos (famously photos of models are often turned into digital paintings used as filler scenes, but it extends to samples and other material).
So DEMO2 exists purely on its artistic merits, design and style without a great deal of technical work having been done by the team. So is it "ok" by the unwritten scene rules or does it challenge the scene to focus less on the technical merits of a piece and only on the artistic bits?
Everyone is going to give different weights to the various rules and criteria for judging demos. In a community that strives for pushing boundaries, these existential debates are a staple. It was assembly vs C/C++, it was pixel art vs Photoshop, mouse vs Wacoms, chips vs raw CPU, MODs vs MP3, soft vs hardware rendering, party version vs polished release, handcoded vs demo engines, secrecy vs opensourcing, compatible vs "runs-on-my-machine", design vs tech, closed groups vs collaborations, fully self-contained vs using system assets like fonts... That's healthy.
I personally value both pacing and merit. I love demos where I ask myself "how did they do that!?", and I love demos where I forget to ask that question while I'm watching them. This one, I found rather uninspired, and obviously very weak in the merit department. It clearly does not deserve a 2nd place; there's just too little of value that the authors brought to the table. In fact, their biggest contribution may be to open the door for other sceners to use UE4 for great things.
My knee-jerk reaction when I found out about the engine was to be upset, but when I thought about it, it's not really any different than all the groups do at this level...it's just that the engine is well known.
I'm more interested in the scene's artistic growth these days anyways...art in real-time, hyper constraints, etc.
In my opinion, a demo, in addition to artistic expression, is a showcase of the technical skill of its creators.
Using a pre-built engine is not quite up to the standard I would normally expect to see.
However, an argument could be made that the Unreal Engine itself is a platform (like the C64, PC, Windows, etc.), and pushing that platform's boundaries is keeping with the spirit of the demoscene.
If we restrict one from using something like Unreal, do we restrict also the use of something like OpenGL or DirectX? Or Windows/Linux itself? There are a lot of layers of abstraction we can remove.
The best news to come from all of this is that the scene is engaged in this kind of self-defining discussion. It makes me really feel good knowing it's growing as an art movement.
Quite an existential question. All but the most extreme such efforts leverage some code from another source. Few people write bare-metal software renderers. I've been mulling over this philosophical question since the days of "demo" code on the IBM 5150 (the quintessential original "PC") using BIOS calls to draw pixels. If you can use BIOS, X11, GPUs, etc then where's the line prohibiting use of Unreal 4?
Demos and intros have to run in real time on the target machine without downloading new material on the fly. There used to be fairly generous size limits for the "demo" category, whereas the "intro" categories vary among 64kb, 40kb, 4kb, 1kb and even 256 bytes. They are meant to run autonomously, without needing user interaction. Demo competitions usually include other categories such as standalone music, art of various styles (pixel, 2d, 3d, procedural) and "wild" demos which are the exception in that they are pre-recorded videos.
As with any form of art, there are always people that ignore or challenge some of these rules and assumptions in one way or another, and a few do so in memorable ways, but that's another discussion.