Instead of the normal way of texturing with tiled images and trying to blend different types of textures together this approch uses one big texture that covers the whole terrain. Because of the size needed for the texture, some smart mipmapping and also compression of the data is needed. The big advantage above the other methods seems to be that this enables the artist to draw the terrain however she likes. There are simply no limits of the number of textures that can be used in the final mega texture.  

Link to more in detail description of the method:
http://www.beyond3d.com/content/articles/95/1

A similar method called Sparse Virtual Texturing:
http://silverspaceship.com/src/svt/