Yes Blender could be used for creating Terrains or something else... But there are much other Terrain Editors out there...
For Blender ive wrote an Terrain creation Tutorial (signature)

Or have a look at "Earthsculptor"

cYa Sebastian


Tutorials:
[Blender]Terrain creation ENG/GER
[Blender]Low Poly Tree Modeling
[GIMP]Create a Texture for Terrains
CLICK HERE