I think a little more description is needed. In virtual reality environments like Second Life, a heightmap is used to make the 3d terrain. It’s a grayscale one-channel image where each pixel value represents an altitude. In the scene render, a plane geometry is deformed according to the heightmap, and then another image is draped over the deformed plane to give it color and texture.
Here’s a heightmap:
and a terrain texture:
Go here to see them in use. Just click through the user and password, click-drag the mouse to look around, use the arrow keys to walk about: