3d model to heightmap
Essentially the technique that samab describes is to apply a gradient map to the terrain from the side as opposed to straight down onto the surface. Thus the dark end of the gradient is at the terrains lows and the white at the highs.
Note, I collapsed the turbo smooth modifier before adding the UVW Map. This may not be necessary but I like to start with a clean model.
I added a small box in the corner with a height that is approximately equal to the maximum minus the minimum elevation of the terrain. I used it as a visual check on the change in the gradient. It was also helpful in checking the orientation (which way is up?) of the UVW map and gradient. The box and the terrain have the same material. I used a Gradient Ramp map instead of a Gradient map to give me a little more control of the rate of change of the gradient. To tune the placement of the gradient you tweak the Gradient Ramp Parameters of the material and you can move the UVW gizmo up and down and change the width (which controls the height because the map is rotated 90°) of the planar gizmo. Experiment a bit with these options until you get something you like.
