What Kay said pretty much.
Here I posted my approach to painting on them itself, though it's kind of out dated, might give you an overall view of it though:
http://www.modthegalaxy.com/forums/thread-wip-project-an-attempt-at-hd-textures?pid=895#pid895
This isn't really all there is though, this is painting/texturing on an existing one, I only do this for items/detail stuff, environment is mostly with mouse. If you're interested in environment textures, look up seamless texturing guides on Google, that's mainly it.
How I approach environment:
1.) Open .dds in Photoshop
2.) Upscale to 2048x2048
3.) Find good stock photos of whatever I'm trying to make, have a wide range so you have more options.
4.) Slap the first one on that looks the most like the original, tweak with Curve/Color Balance/Vibrance, so it matches it colorwise.
5.) Use custom brushes and stock photos/existing textures to make it seem decent.
6.) At the end, merge, then Filter > Other > Offset, then enter half the resolution of yours, so for mine 1024x1024,
7.) CTRL+A (Select all) then CTRL+C to copy
8.) In history go back before merging the layers, CTRL+V the Offset layer you just made above them and softly erase the middle so the edges remain seamless, or you can sometimes use the clone tool, depends.
That's sort of how I do it, but it varies, once you get a feel for it, you can mix it up. I'm probably doing it all wrong rofl, it's the first time I'm doing it, but it sort of works.
I might make some full blown guides in the future once I got more experience.
