This article provides the definitive explanation on texture compression in X-Plane. Specifically of interest:
The recommended practice for developers remains the same:
- If your textures look better without compression, ship DDS and PNG files, and pre-compress using XGrinder/DDSTool.
- If your textures don’t improve much by running uncompressed, ship only DDS files, pre-compressed with XGrinder/DDSTool.
We should therefore provide both DDS and PNG textures for everything.