ESO works with DDS (
http://en.wikipedia.org/wiki/DirectDraw_Surface) textures. To work with them you will need an image viewer and an image editor.
Irfanview has you covered on the viewer side. Just install Irfanview and after that install the Irfanview plugin.
Irfanview:
http://www.irfanview.com/
Irfanview Plugin:
http://www.irfanview.com/plugins.htm
To work with DDS textures you need DDS plugin for your image editor. Hopefully that is Photoshop. You can grab that plugin right from nVidia.
DDS plugin for Photoshop:
https://developer.nvidia.com/nvidia-...dobe-photoshop
DDS plugin for GIMP:
http://code.google.com/p/gimp-dds/
Texture size
Like in WoW your textures need to match a size multiplier of 8. Thus: 16,32,64,128,256,512,1024. Means a valid texture size is 32x32 and so on.
Two layers are important. The image layer and the alpha layer. The alpha layer decribes the opacity that is applied to the image layer later on. White color on the alpha layer means 100% opacity. Black is 0% opacity thus transparent.
Image layer
Alpha layer
Result
Saving as DDS
When saving a DDS file choose DXT5 ARGB.
AddOn Texture Integration
Assuming you have an addon that should use the texture and you have a media folder in that addon.
lua Code:
local t = WINDOW_MANAGER:CreateControl("UniqueTextureName", control, CT_TEXTURE)
t:SetTexture("MyAddonName/media/myTexture.dds")
t:SetDimensions(64,64)
t:SetAnchor(CENTER,control,CENTER,0,0)