HLSL

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The Source Engine uses the C-style HLSL (High Level Shading Language) for shaders. There is another language called CG (Which stands for 'C for Graphics'), which was developed alongside HLSL by NVIDIA. Cg is so similar that most Cg shaders can be quickly and easily ported to HLSL.


Direct3D Versions and Shader Models

Direct3D 9 shaders can be designed using any of the following: Shader model 1, 2 and 3. It should be noted that there are versions 2.0a and 2.0b which are optimized for specific vendor graphics cards.

Direct3D 10 shaders can only be designed on shader model 4.

Direct3D 11 shaders can be designed on shader model 5.

Microsoft HLSL website