Good question, indeed. I was always wondering how the professionals were doing it. They also have a well-working solution for blending textures smoothly, as it seems. But because you can blend hundreds of textures on one terrain, I don't think they use a shader. That'd probably be too slow. If anybody knows what might be going on there, please tell us! I'm especially interested in having the textures blend smoothly - the Generals Engine seems to do some kind of alpha blending there...
Any help is appreciated