Most terrain engines use some form of 'stencil' and/or vertex painting to blend textures and/or create feature areas, but... those are specifically tooled for the job. What you might find is these maps are overlays; a map is build and then some sort of tool is used by the level designer to 'paint' over the entire level to give it 'uniqueness' that can be baked or saved as a 'map' the engine can read and interpret.
This is what was implied with the initial question about what engine you're going to be using, it's critically important, so ideally you really need to lock that down otherwise you're potentially doing a lot of work that's not going to be of any use. So... choose an engine, study what you can do with it and then go from there - build around your tech rather then the other way around.. it's much easier.
Sounds like you're talking about height-mapped terrain?
I'm not a fan of that method, crazy as that might sound.
Too restricted (voxel editing notwithstanding; not a fan of that either) and the results never look "authentic" to me. There's the texture stretching on steep/high vertical surfaces. Using an engine that allows mapping on vertical surfaces (Turbine's engine, NeoAxis Engine, etc) has the tendency of showing streaks where a texture mapped along one axis "bleeds" over into a perpendicular surface. There's the inability to achieve subtle detail and control - without modeling something and dropping it on the terrain, which leads me to my main issue.
The results always betray the fact that it's a bunch of pre-modeled props set on a separate ground plane and you can clearly see a seam where the two intersect. I have never been a fan of that method. The only games I can think of where they do a good job with it is Fallout 3, Oblivion and some maps in Unreal Tournament 2004 and UT3. It just always has the effect on me that I'm in a paper-thin world of props and set pieces.
That's why I'm going with a purely 3D modeled tile approach. Everything blends together smoothly. Ground can blend smoothly into a cliff, both in geometry and in texture blending... You can achieve small details, like small ridges or cracks in the ground, ridges, overhangs.. You can have things like natural stone arcs transition smoothly from the surrounding ground rather than being obvious separate props dropped in place. And so on. It makes the environments look and "feel" much more solid, I find.
There are benefits to editing with that approach too. Say you're working on a large area on a height-mapped terrain and a decision is made to completely scrap the current layout and re-do it. Now you have to go back, erase everything, re-create the topology and all its nuances/details. You have to re-do the texturing, etc. etc. That can take days, easily, to re-do.
With a tile-based approach, you remove the "offending" tiles, and re-place them with new ones, arranged in the desired layout. Getting the base layout in place with tiles could take, maybe, hours to do... unless there's custom tiles to be created for the new layout. Otherwise, everything just "snaps" into place. Tiling allows you to iterate much more efficiently, and with much quicker feedback on the results.
Here's a great example that actually demonstrates the effect of both approaches as I describe...
Check out this image. It's from FFXI, in an area called Mt. Zhayolm.
Look at the cliffs to the left leading down to the water, the larger rock outcrop to the rear-right, and the small, sharp rise in the ground in the foreground. Notice how that all blends in smoothly? There's no harsh seams. That's because it's all modeled and textured as a single model.
Now, in that same scene, you can see what I'm talking about with props as well. That small mound in the center of the image... You can tell just by looking at it that it's not a solid part of the environment, but a prop dropped on to it, because there's a clear and very obvious seam where it meets the ground beneath it. In a typical height-mapped terrain system, you'd see those seams for everything in that picture. At some point, for the cliffs leading to the water, that would have to be modeled as a separate "prop" and dropped on the terrain, leaving a very clear seam line where the cliff/prop and heightmap terrain meet... Chances are the textures wouldn't mesh or line up properly either. It's just an eyesore to me.
Incidentally... I noticed something kinda funny in that pic. Look down the shoreline, and you'll notice that same structure used 3 times. I guess they didn't utilize as much variety in that particular structure. Since the geography adjacent to the shoreline is different as it goes down the shore, the tile borders are probably somewhere right in line with where the screenshot is taken from.
Man I love dissecting this stuff lol.
So... in a nutshell, that's why I'm going with a tile-based approach.
That said, I've decided to revert back to 2.49b for my tile work. I'm gonna wait 'til 2.5 goes "final" and they're done screwing with the interface and deciding what and what not to include. I'm trying to follow tutorials and am finding that too much isn't where the tutorials say it should be. They refer to add-ons that are supposed to be included in the build (according to the tutorial), but aren't. Seems like they change things up from one version to the next, and it's just too much hassle trying to make heads or tails of it. I just want to get my tiles created so I can start testing them out.
So... I'll stick with the stable familiarity of 2.49 for now.
Anyhoo... Off to work!