No a "terrain" is a special kind of model.
It is used as landscape (hills etc.) and looks (most likely) better than a landscape made out of blocks.

You get MED, WED and SED with all 4 different editions of GameStudio.
But the difference is that the MED in the standard edition does not support "terrains" plus the max screen resolution is 800x600.

If you haven't done so, check out the edition specification list:
http://www.conitec.net/english/gstudio/3dgs2.htm#editionen