DDS is a texture container file format, it stands for Direct Draw Surface.
"Container" means it can contain a variety of image formats: compressed or uncompressed, various bit depths, optionally with mip maps, and can be stored in various layouts: 2D, 3D volume texture, or Cube map.
DXT is a popular compression format to use inside a DDS file. DXT compression is widely supported on current graphics hardware, meaning it will stay compressed in video memory, allowing the artist to use more or larger textures.
- PhotoshopTools#Export_Tools lists DDS import/export tools for Photoshop.
- NVIDIA Texture Tools 2 - Command-line tools for creating DDS files, GPU-accelerated, 32bit and 64bit OS support.
- NVIDIA Texture Tools - Command-line tools for creating DDS files, GPU-accelerated, 32bit and 64bit OS support.
- DirectX Texture Editor (Dxtex.exe) - Microsoft tool for viewing, editing, and creating DDS files.
- DDS Cube Map Example - Microsoft documentation on how a cubemap is arranged in DDS format.