Tooltexture

Todo: find out what else this parameter is also used for

Used for blend texture previews in hammer.

When using a preview tooltexture in a material, the material is scaled up or down to the size of the tooltexture. If the material is a blend of two 1024x1024 textures but your tooltexture is only 256x256, the 1024x1024 textures will be scaled down to the much lower quality of 256x256. Unfortunately, this means that the tooltexture cannot be made smaller to save space (since nobody will see it in-game). You'll need a preview tooltexture as large as you want the texture to display within the engine.

VMT syntax example

"WorldVertexTransition"
{
	"$basetexture"     "dirt/blend1_mountain_dirt_a1"
	"$basetexture2"   "dirt/blend2_mountain_dirt_a1"
	"%tooltexture"      "preview/blend_mountain_dirt_a1"

	$bumpmap           "dirt/blend_mountain_dirt_a1-ssbump"
                "$ssbump"   "1"
 
	%detailtype desert1
	"$detail"    "dirt/blend_mountain_dirt_a1_DM"

	$surfaceprop      dirt
	$surfaceprop2    rock
}

The texture in preview/

This is useful for showing what the 2 blend textures are in a single image, without this it will just show your basetexture on it's own thus not showing it's second blend.