Capsule Shadows can be used to enable support for soft shadow casting for Skeletal Meshes by using a capsule representation of your character made from a Physics Asset. The soft shadows serve to ground the character in indirectly lit areas and give soft shadows in directly lit areas. Direct capsule shadows require conventional shadow maps. They aren't rendered for lights that use Virtual Shadow Maps, which new projects use by default.
Capsule Shadows
Information on using physics capsules for dynamic soft shadowing of Skeletal Meshes.
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