ArmA 3 Terrain Builder Satellite Surface Mask Materials Per cell

Terrain Builder mapframe properties → processing → imagery options, is where you find generate layers button and options for materials per cell.

4 materials per cell is for arma (armed assault, aka arma 1) technically. Which is when bis used per surface MCO textures which is like a mid range texture to provide extra surface detail. However in arma 2 and arma 3 they abandoned it for an extra ground texture and went with a total terrain MCO defined in the main config.

For arma3 terrains you should be using either 6 materials per cell or 5 + satellite normals.