Straightforward. You need a program like Gimp or Photoshop. You make a new canvas that is 512x512 in size, and you have to set the mode to greyscale. Then you basically colour it in varying shades of grey. Black areas will be areas where the land is at a low level and will probably be filled with water. Lighter areas and white areas will be at a higher level, white being the highest and will probably make up most of your hills or mountains. Then when you've finished, you save it as "MapNameTerrain.png" in the Terrains folder. If you've done all that correctly, it should work in your map maker.
It's a lot simple if you have Gimp or Photoshop.
Gimp is free and a lot more easy to use ten Photoshop but, Photoshop is a lot more professional.
If you're interested in making that height map, look here.
http://www.feral-heart.com/index.php?option=com_jfusion&Itemid=2&jfile=index.php&topic=17452.0
