For texturing you can use things such as Adobe Photoshop, Paint Shop Pro, Gimp or virtually any paint program.
You should use the ArmA Texture Naming Rules always when texturing.
Panda[PL] said: No, don't use different textures for each LOD. In ArmA if texture is not needed in high resolution anymore (because of distance or low frame rate) the engine automatically scales it down in memory (drops out every one in two pixels, that's why all textures need to have dimensions of powers of two). On the other hand loading a texture from HDD or from ram into the video memory is performance consuming and will cause FPS drops. So use the same texture for every LOD and let ArmA worry about it.
Ohara (BIS dev) said: Drop of FPS in vegetation is caused by overdraw, it means that graphic card is not able to draw so many pixels that scene needs. When GC draw scene, it automatically cut hidden pixels, BUT only if this pixels are not alpha transparent. Vegetation is buildup from polygons with some opacity textures, so this cutting (early Z test on HW) not work here. There is no simple solution, better performance will be with low shading detail settings (simplified pixel shader), but overdraw is still there. Also using of worst LODs will not help so match, because less polygons means worst tree shape approximation and final surface (what is most important for overdraw reduction) will be similar. We are still working on some research in this area.
He concluded more (which really doesn't help us ArmA modders): Yes, we found solution how to reduce overdraw about 25%, but this solution need different representation of tree surfaces and vertexes (different model and binarisation of this model and different way, how to switch vegetation LOD's). So it's not usable for current vegetation data and will be used in next projects. Alpha textures mean also masked textures (that is 1bit transparency or opacity if you want and we use them).
Basic tools for texturing are any sort of image editing program, we suggest Adobe PhotoShop with PAAPlugin, then to fiddle with ArmA specific stuff use TexView 2.
You can use O2 to apply the textures into your p3d model. You must create the rvmat file for your specular and normal maps, the rvmat is then applied normally with O2 into the model.
More details on specular maps read here.
More details on normal maps read here.
Those _AS textures are what store the shadows information of models. For example if you edit a soldier model, remove its helmet you are left with the chin strap shadow in the soldiers face, how to remove it? Well the shadow is located in the _AS texture.
Its very simple, just load your _CO texture with Texview2 and choose Save As… and give it <filename>_AS.paa file name and it is automatically saved to _AS format with the pink “style” in it.
Merging textures in O2 is possible, read here.
How to texture roads and built the rvmat files, read about it in here.
RVMAT files are the ones that control many aspects of normal and specular maps, they are critical on any texturing in ArmA. More details in dedicated rvmat page.
Reflective Glass Tutorial by Obmar.
Material Editor Tutorial by Linker Split.
Normal and Specular Mapping Tutorial by Linker Split.
Reskinning Tutorial by granQ.
Editing Alpha Channel for your texture.
How to create Mud Textures by DaSquade.
Texturing Howto by Soul_Assassin.
How to create custom texture using hiddenselections.
Satellite image editing tutorial by Max Power.
How to create soldier wound textures is explained here.