I feel a little more should be written on this.
It is caused by mip-mapping. Although you can't manually edit mip-maps in tga files, the game will do it for you. With DDS files you can edit the mip maps yourself to give it a much smoother, fluent appearance in-game.
The term 'mip' comes from the Latin phrase "Multum In Parvo", meaning lots of things in a small place. In this case it refers to how much detail you can cram into different resolutions.
Mip mapping features multiple images of a single texture map at different resolutions to represent surface textures at varying distances from the viewer's perspective, the largest resolution being displayed up close and progressivly smaller as the perspective recedes further back. This saves system resources on objects far away from the camera for use on closer objects. Each scale difference is defined as a mip map level.
Basically, as you go down each level your texture should be scaled down and very very slightly blurred. If done well the transition between each level should be seamless in-game.
Hope that helps :P
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