To shape or edit the height of the landscape, either select the toolbar button or press H. H switches height editing on or off.
Once you are in height editing mode, the pointer in the render window will select vertices on the landscape as opposed to objects.
Clicking and holding on a vertex allows you to move it. Drag the mouse up and down to change the height.
You can edit the speed of vertex movement in the properties menu.
Edit Radius: This is the radius (in vertices) that will be changed as you pull the vertices up and down. A larger radius will create larger hills or valleys.
Edit Falloff %: This is the amount the vertices move based on how much you move the vertex you select, within the radius. A value of 0 will create a linear (straight) falloff, while 100 will create a curved falloff.
Flatten Vertices: When this option is selected, all vertices in the edit radius will be set to the height of the fist vertex you clicked on as you paint.
Soften Vertices: With this selected, all vertices in the edit radius will be set to the average height of the surrounding eight vertices and the center vertex. In effect this will smooth the shape of the landscape.
Show Edit Radius: This simply displays the red edit circle in the render window or hides it.
All Landscape starts at a height of –2000 units. Sea level is 0. Anything below 0 will be underwater. Thus when building a new area, you must pull the landscape up above the water.