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I was watching some YouTube tutorials on making terrains in UE4 and in each one they mention that the larger the terrain the worse the performance gets. I was wondering what you would do if you wanted to create a map like in skyrim or WOW. Is the terrain made of one massive terrain or is it made up out of a series of terrains in a grid? And is there any optimisation that you can do or is it all handled by UE4?

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This link should help. Although it's about satellite maps, it still answers your question: UE4 has support for importing tilesets, which is your giant terrain broken up into pieces.

You could also look here to find UE4's World Composition tool, which makes it incredibly easier to use a large terrain in your game. (So, to answer the other part of your question, it is, in fact, handled by Unreal.

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