Getting the necessary tools.
First off, you must have Adobe Photoshop, if you do not have adobe photoshop then you may download the trial for Photoshop CS2 here.
After downloading and installing photoshop, you will need to download the fallowing DDS tool, which allows you to open/edit/save DDS files.
To save you the trouble of figuring out what file is what, you may download this DDS thumbnail viewer, which shows you what the texture looks like when you view files in thumbnail form.
http://mysticcoder.net/mysticthumbs/ [Works on both 32 and 64 Bit OS]
Terms you will encounter and what they mean
Texture/DDS - A texture is the colours and detail you see on a 3D image. It looks like a mess on it's own, until it wraps around the 3D object.
Mesh - A mesh is the 3D object that has no colour or detail, this is the object the Texture covers.
[The texture is like a colourful wrapper, and the mesh being the candy that shapes it.]
xml - The file containing the client scripts. These are mandatory for client and server communication, and even 1 mistake in the text can crash the client.
Alpha Layer - The alpha layer is responsible for transparency in a texture, most notably in skills. Without it you would see white boxes instead.
Anchor - A Pen point which can be shaped around an object, Excelent for cutting.