Making object proximity mask, is it possible?

To illustrate what i mean, i made a little gif:
output_w0gkLe.gif

I need the Sphere, or any other object for that matter, create a falloff kind of mask on proximity to other objects, this has to be dynamic, the white circle has to follow the sphere, as in the ground plane there in the gif, and disappear at distance.
And since i want to do this with other shapes of objects, it doesn’t have to be always a circle, it has to have the shape of the object.
The way i thought of this, is to gather the distance from the moving object to the wall or floor, and paint the wall or floor based on that distance.
Now, is something like that even possible in UDK?

I see this is your first post. Are you sure you want to start this project in UDK and not UE4?

In UDK, I would do this:

Make a texture in Photoshop or wherever that has an even falloff from white in the middle to black at the edges.
Make a translucent unlit material in the UDK editor, give it a scalar parameter, multiply the scalar by your texture, and plug that into opacity. Plug a constant vector into emissive.
Make a class that extends actor. Give it a static mesh component for the sphere. Give it 6 material instances of the material you created in the step above. Give it 6 decal components, each one using one of your material instances, and point them up, down, left, right, forward, and backward. In every tick, make 6 traces: up, down, left, right, forward, and backward. Change the material instances’ scalar parameters inversely proportional to the distance you traced.

OR…

You could give the actor a dynamic light with a relatively short range. Dynamic lights will quickly kill your performance though, so beware.

Depends on what you want to do with the sphere, like does it need to interact with the world or the player? Besides an emitter you could create a spherical mesh, attach spotlights and point 1 down and the others at 90 degrees (use trace to turn on/off and change sphere direction), or attach 2 other meshes and use trace or hit wall events to trigger change of direction or maybe use a simple matinee and create a static path. Also depends on the map, will it be flat or will it be uneven landscape so you may need to consider that.

Loads of things you can do just depends on what you need the sphere to do.