Well, when you select the layer you want alpha, or whatever, right click it, save selection as... name it alpha, and leave everything else default. Make a v_hands.vmt and add this in it:

VertexLitGeneric { "$baseTexture" "models\weapons\vmodels\hands\vhands" "$bumpmap" "models\weapons\vmodels\hands\vhandsnormal" "$envmap" "envcubemap" "$normalmapalphaenvmapmask" 1 }

That should do it!

Displacement map - well, I only know this term for Photoshop. It's used for making things apply to a 3D-looking object, although in 2D as its only a picture.

Bump Map // Normal map - They produce fake shadows and highlights on your model. It makes a 2D texture seem more 3D and is used to save polies. For the Source engine, only Normal Maps are relevant (bumpmaps are something similar for other game engines). And yes. the nvidia normal map filter is a way to produce these maps.

reflection map - guns have this. white = shiny and black = not shiny? Exactly. Not only guns have these, nearly everything in CSS does. They simply tell the game engine where are reflective spots and where not. Don't overdo them as values above 50% gray are resembling a mirror.

PHONG - It's something similar to a reflection map, but it can do more things. It can produce highlights in every way, dull ones, sharp ones etc. -it's quite hard to use them the right way and therefore most people who apply it to their skins make them look crap. If you're a beginner, stay with reflection maps.

height map - another kind of a bumpmap, which is again similar to a normal map. Not really used in the source engine, forget about it.

specular map - one of the two maps used when applying Phong. If you're not using phong, forget about it.

alpha map -- I know you can add an alpha layer in the channels tab of photoshop, but what does this do? Do I do it to the skin, the skinnormal, or the skinref? There are loads of things an alpha channel can do. It's basically a second, gray-scaled picture in your picture. Usually it's used as a reflection map when using a normal map. This way, you can save another picture. Or it can be used for Phong. Or, if you add an alpha channel to your diffuse map (= basic texture), you can use it for reflections, or to make things transparent or even invisible.

Yeah, you seem to know more than me, i just copy other peoples vmt's and tweak them a bit. I only use normal maps, and my normal maps are my phong maps, i've seen people have seperate phong maps which i don't know why you would do that.

Anyway good luck, sorry i can't be of assistance.

Like hitmanx says, i do the same way, i use the vmt's from others, and i try they goes with the skins i do...that all

Normal map: is kinda the relief of the skin's surface

Phong: is like a a opaque reflexion

specular: i just see with it that the skin shine in from the sun

You seem to have it pretty well, it looks like your embedding the ref map in the normal map. Just remember that you probably won't want it to be pure white because then it will be extremely reflective and none of the details will show. Phongs are pretty crazy, I'm not really good at them, but I know with and exp map you can control what is effected by phong and what isn't and the exponent range is the brightness of the highlights.

Im not a expert but rootbeerz post looks good.