VTEX (Valve Texture Tool)
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Overview
Vtex, or Valve Texture Tool, is the standard application used to convert targa (.tga) image files into Valve Texture Files (.vtf) for use in the Source engine.
It is located in the /Steam/SteamApps/username/sourcesdk/bin/
folder.
Vtex can be used in two ways: Through the "drag-and-drop" method in Windows (described below), or through the command line interface.
The drag-and-drop method
The drag-and-drop method is an easy way to use Vtex.
Todo: More detail - the process is apparently currently described in Creating Materials, but should be moved here.