The terrain part creates a height mesh based on the color settings in an image file. You can create monochrome image in any image editing tool to use for the creation of the height mesh. When you add a terrain it will pop-up the dialog shown in figure 1. You will need to specify the height map image file, a texture file, and set the segment width, length, and maximum height. When the terrain is created it will go through the image file and create a vertex in the mesh for every pixel in the image. The height of the vertex is determined by the color of the pixel and the maximum height that was specified. If the pixel is white then it will set the height to be the maximum value. If the pixel is black it will set the height to be 0. Intensity values in between those two will be linearly interpolated. Each vertex will positioned apart by an amount specified by the segment width and length. These two values are the distances that will be used between each vertex. So as an example, lets say we have a 50x50 pixel image, and we specify a segment length/width of 1 m, and a max height of 5 meters. Each vertex will be a minimum of 1 m away from its neighbor, and the height will range between 0 and 5 meters depending on the intensity value of the pixel. So the total terrain will be 50 meters x 50 meters in size. Once you have a terrain you can use it just like the ground plane as your base surface. However, one word of caution, If there is a possibility that your parts will ever go over the side of the terrain then I would probably add a ground plane just under the minimum height of the terrain. If you do not then when an object falls off the terrain it will just keep on going as if it fell off the edge of the earth. If you have a ground plane underneath it though then this will prevent that.
To see a description of the properties common to all bodies follow this link
These properties are specific to terrain only.
Acceptable range: any number greater than zero
Textured Segment Length The number of length segments to split the terrain into for the texture. Default value: 1 Acceptable range: any number greater than zero
Textured Segment Width The number of width segments to split the terrain into for the texture. Default value: 1 Acceptable range: any number greater than zero
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