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These are the standard material types you can use in Source engine materials that you would traditionally use in 3D packages or other software. I have listed the image format and information for each on how the texture you create is interpreted by the game in the final product. Hopefully this will help texture and other 2D artists to create their source artwork without needing to worry too much about what requirements the engine has of them.

General>------------------------------------------------------------<
>File Format
24 bit Targa image files with 8bits/channel for RGB, may also include an 8bit alpha channel for 32bit RGBA images. Targa files that are saved with internal RLE compression sometimes have troubles converting to the valve texture format and should be avoided.
>Image Size
Any power of 2 will convert fine. Source will accept textures up to dimensions of 2048x2048. Images can be rectangular as long as the edge dimensions are multiples of 2 (eg 128x512).
Diffuse (colour)>------------------------------------------------------------<
Diffuse textures can be thought of as the base colour of an object. A diffuse image will show the colour of an object the same as the diffuse texture when under white light, when in full darkness the diffuse texture will be black.

Diffuse textures are the easiest to make. A simple 24 bit RGB targa file is all that is needed.
Transparency>------------------------------------------------------------<
For areas of a model that require transparency, such as a laser sight or piece of glass, you can simply include an alpha channel in your diffuse texture.

The converter will automatically read in the alpha channel of any 32 bit targa image and convert it into a transparent texture.
Self Illumination>------------------------------------------------------------<
The relative brightness or darkness of an object's surface. Self illumination masks are like all masks in Source in that they are simply normal 24 bit targa images but they use greyscale only.

In this case, darker parts of the image are less bright and reflect the ambient light more. So if you put on an entirely black self illumination texture it would be as if it wasn't there. Lighter areas make the diffuse texture colour shine as if it is a light, note that the brighter the object is, the less lights around it will effect it. If you had a red diffuse texture and white self illumination mask, the object would glow a hot red.
Specular Reflection>------------------------------------------------------------<
Specular (specula, some spell it differently) reflection is the type of reflection you would normally think of as coming from a mirror. Whereas shining light on a diffuse texture makes it reflect the colour of the object, shining light on a specular texture makes it reflect the colour of the light.

In Source, the easiest way to do specular reflection is to simply set its parameter to 'env_mask' in your *.vtm file. The engine will dynamically load up reflection maps for your texture based on its position within the world. handy!

The specular texture you need to make is actually a specular mask, which again is a greyscale 24 bit targa image. Darker areas will have less reflection on them, whilst lighter areas will look extremely shiny.
>Note:
The specular mask texture and bumpmap texture of an object can be combined into one texture if you prefer. Create your bumpmap as below and then make an alpha channel for it. You can add your specular mask into a bumpmap's alpha channel and then convert as a 32 bit targa. In your *.vmt file, set '$normalmap' to the filename and add the value '$normalmapalphaenvmapmask' '1'.
Bumpmaps>------------------------------------------------------------<
A bumpmap or normal map is a good way to add extra detail to a model without needing to use more polygons. With bumpmaps, you can give the illusion of depth and fine detail on a flat object. Note that this is an illusion only, and that when viewed from the side, a flat surface with a bumpmap applied will still appear flat.

Source interprets bumpmaps in a newer way, and so they can no longer be simple black and white images. Instead, they are full colour 24 bit images that look all purple and green - the colour tells the texture in what direction to move the surface beneath, as well as how much.

To make a bumpmap for source, the easiest way is to download this photoshop filter, made by nVidia. All you have to do is create a standard black and white bumpmap. Dark areas will recede into the surface, bright areas will pop out. Mid grey values of (127,127,127) will leave the surface untouched. Now, apply the nVidia filter to your image. There are number of options to control the strength and smoothness of the effect which you can tweak to your liking. Once done, save the image as a 24 bit targa and you have a bumpmap.
Animation>------------------------------------------------------------<
Any texture can be animated in Source through animation proxies. Animation is easy to handle as you can simply create a series of textures in any way as described above, and then import them into a single animated *.vtf file. Alpha channels are imported for each image in the sequence, so you don't need to worry about some of the issues traditionally associated with transparency in GIF animation.

There are many other material types defined in the Source engine. In fact, you can even write your own shader types. Feel free to experiment with different conversion options to get interesting results.

A full listing of all material types can be found here: HL2world.com Wiki.

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