From Valve Developer Community
A heightmap is a grayscale texture where the brightness of each pixel represents its height (relative to its surface).
Steps to creating a heightmap
- Create a copy of a texture in grayscale and edit it if you wish. White corresponds to the pixels closest to you and black corresponds to pixels farthest from you.
- Save the image as a targa (.tga) with
_heightat the end of the filename.
- Convert the targa image to a Valve Texture File (.vtf).
- Put it in the same directory as your texture.