Let's have a look at the Create A World Tool which will be available for download in December at the official site. This tool is used by the Sims 3 team themselves for creating all the neighborhoods. You can choose from a premade terrain to start from but you can also create your own heightmap which you can import. From there you can do further changes to the terrain. There are a couple of tools available with which you can sculpt the landscape in an interesting way.
Further you have the possibility to import your own textures to paint on the terrain. There's a limit of 8 textures used per neighborhood section (2x2 sections). However, if you're not satisfied of a texture, you can easily replace it. You can even assign a sound effect to a texture. It's possible to place all kind of trees and other objects as well as effects into the neighborhood. This stuff can be moved and rotated at any wish. So you're basically able to place rocks in the air. :P
My created, but not yet finished, neighborhood with the Create A World Tool.
You can place streets and walkways everywhere and connect them. Their path can be set with bezier curves (like in Illustrator). Lots don't have to be attached to streets but it's recommended to do so to not confuse the game's track system. Lots can be freely created with a rectangle, although there's a maximum size. Whenever you need to make changes ingame, you can do that. There's a button with which you can switch back and forth between the editor and the game.
You can also define areas where the camera and/or sims can't go to. Such areas are automatically created when hills or mountains are too steep.
Well that's it for now. Going again to the editor to place the streets and lots. :)
Edit: Back with having the neighborhood basically finished. But there's actually so much more you can do!
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