I am following Damian Lazarsky's (tea and cigarettes) 3D Motive tutorial on creating foliage for UDK. I'm creating birch trees for my environment, and just finished the texture for the branches. When he proceeds to the next chapter on creating the trees, he already has a tileable bark texture for use with his trees, and…
For smaller tree trunks, creating a tiling texture from a photo will work well enough if most cases (and generating a normal from that). If you are making a bigger tree that will be a focal point, zbrush or any sculpting software would be the best option.
You can also use alphas of other tree textures and combine them to create a new tree bark. Or maybe adjust brush parameters to sculpt from scratch. There's some videos out there doing that but then bark alphas are added. Though just like zac said, it all depends on whether the tree is a hero piece or filler. Might try all…