Creating detailed Normal Maps
Why Normal Map?
You need to create a Normal Map first and foremost because if you don't, your texture wouldn't reflect light and therefor appear black ingame. On the other hand, there is an even better reason why you want to do one too. Normal Maps are designed to make an object look much more detailed than it actually is. On basis of the lighting and the stored information of the file a congrous surface is simulated. That means, that you can stay in front of a completely flat stone wall that looks like it has an uneven and rocky surface, just due to the Normal Map.
Not all textures have a Normal Map, just that ones that are rendered ingame such as tables, books, clothes, etc. Icons, book images, menus and whatnot aren't rendered ingame and therefor don't need one. The Normal Map is named like the texture itself, with the exception that _n is attached to its file name.
You can have an endless amount of textures relating to one Normal Map. Example: You have a Normal Map and two textures. The Normal Map is called normal_n.dds and the two texture files normal_tex01.dds and normal_tex02.dds. The game will relate both textures to the correct Normal Map, because the letters behind the underscores will be ignored. That's why you should avoid naming your texture something like my_uber_sword_texture.dds.
And why's the Normal Map's detail important? Because it depends on the Normal Map how uneven and rocky your stone texture looks ingame. Less detail for the Normal Map means less detail for the texture itself.
Further reading:
Creating a detailed Normal Map: The blur method
There are many ways to make Normal Maps. Unfortunately, the most common is to just fire up Photoshop or Gimp, use the Normal Map PlugIn on the color map and than think to be done. That's how it works, but it doesn't work well, because this way created Normal Maps make a texture pray for a bag to pull over its head. There are ways to improve Normal Maps drastically too. Even EASY and FAST ways EVERYONE can take the time and nerves for. (Easy, Fast, Everyone - the holy advertising trio.)
For example, there is the blur method. It's a monotone and easy way, but get's the job done very well. I made this texture seamless and now open it in Photoshop. Before you run the Normal Map filter on it, make sure your texture is a background layer, otherwise the filter won't work as desired. I now use the Normal Map Filter on the texture; the file settings are very important to get a good as possible outcome. I strongly recommend to read the Appendix part of the article Quality Normal Maps in GIMP.
The edges of the Normal Map are very sharp, way too sharp. If that's the case it's best to run a slight blur filter on it; the strength depends on the texture.
Now I copy the background layer and set it to Overlay. I use a gaussian blur filter on it. Strength: 0,5 - but that always depends on the texture; you'll have to try until you're satisfied with the outcome. The difference is already cognizable.
I repeat the above mentioned step: I copy the background layer, set it to Overlay and blur it slightly stronger than the first time (Again: Depending on the texture "slightly" can mean a difference of 0,5 as well as 3 or whatever).
Besides, it's not necessary to move the layer to the top of the layer stack - too circuitous and the outcome will be the same. I go on to copy the background layer, set it to overlay and blur it, every time a bit stronger (about 0,5), and every time I check if the current layer makes a difference to the overall picture. It makes no sense to copy and blur whether it has no effect anymore. This one took 12 blur layers, but the number, as always, depends on the texture.
IMPORTANT: When you're done, you must merge all layers to the background layer and than again use the Normal Map Filter on the image, but this time with Normalize only checked. That's to re-create the now white Blue Channel.
That's not for a long time yet Bethesda quality, but it's far better than what the Normal Map Filter produces and with a bit more handiwork you can create very nice and detailed Normal Maps (the quality loss of the image is due to compression; would have been nearly one MB on maxium, just so you know). Another example showing how this method works.
Best is to use a 3D program, sure, but the fewest will have the possibility and ability to do so and it can be a bothersome work as well. For the ones who are interested in this method anyway, Councilor at deviantart.com did a good job on two tutorials regarding this matter.