The DirectDraw ® Surface (DDS) file format is used to store textures and cubic environment maps, both with and without mipmap levels. This format can store uncompressed and compressed pixel formats, and is the preferred file format for storing DXTn compressed data. Microsoft ® is the developer of this file format.
You can use DDS files as texture maps.
With Direct3D 9, you can render to the DDS format. (With DX8 or DX9, DDS files can be rendered using the Metal Bump shader, as well.) If your system does not support DX9, you can use DDS files as textures, but you can't render them.
DDS supports a variety of output formats, which vary in the number of pixels allocated to the red, green, and blue (RGB) channels, to the optional alpha channel (transparency), and to possible unused bits. There is also a set of compressed formats.
When on, mipmaps are generated for the image. Default=off.
Mipmaps are a set of lower-detail bitmaps. The first is half the size of the original image, the next is half the size of that, and so on down to a single pixel. (You can think of them as being arranged like a pyramid.) They are used to optimize display time and reduce aliasing when the texture is to be displayed at less than full size. For example, if your original DDS image is 512 x 512 pixels, but the area in which it would be displayed is only 100 pixels square, the display device would interpolate between the 128 x 128 mipmap and the 64 x 64 mipmap.