Attached Link: http://developer.nvidia.com/object/nv_texture_tools.html

DDS textures used in the game were developed as a way to compress and render tga textures using active X. You can find white papers on the technology, a plugin for photoshop and texture editors at the nvidia developers site. DDS textures have layers that can be assigned transparency and bump essentially making them 3D objects. They also have mip maps or the ability to fade to a color at a game distance. This allows the game engine to save processing by not rendering distant objects.