The sprites themselves are bitmaps you have to create in a graphics program like PainShop Pro or Photoshop etc. The file format used are bmap, pcx or tga (tga can have an alpha transparency channel). To make an animated bitmap you put a series of images side by side into one image file. These images themselves cannot be edited in 3dgs. But their overall appearance can like size, ambient color, transparency, direction etc.

Best way to find out how it works is to get the trial version, play around with it a bit and read the manual. These can be downloaded from the download page.

cheers,