I can find any real information on this subject. The wiki talks about painting alpha maps onto the terrain but doesn’t say how. Nor is there any mention of normals being allowed? Is this the way it works? No MIP maps, alpha or normals on terrains?
To make use of the alpha channels of ground textures on the terrain, you need to make your own version of the terrain shader. I once used the alpha channels to make a bumping effect. Unfortunately, due to the nature of the terrain object, you do not have an actual material, with slots and stuff, so things are a little less modifiable, unless you script a way to send values and textures directly to the shader.
A lot has happend since I did the trick, and people have come up with many ways to do this. Just found this link, for instance: Private Site
So search around. The resources are out there. But I would recommend using google for any search, as long as you add Unity to the search string.
thanks. i was just searching the forums here only. on a side note i did notice this features seems to have been added to 4.x 