First off, you need to make a grayscale image(white is high, black is low). You can make things as compicated as you want, but I kept it simple. Anyhow, once your done, go to the Lattice tool(next to the rock, it looks like a double-sided mountain) Go to the "e" on the bar next to your 3-D wireframe. This is the edit terrain lab. Now, click the pictures tab, and paste your grayscale image in both blocks. Click Apply, and your done. You can keep doing this for sections, but like I said, it would slow you down a whole lot(with the polygon count and all)