Ambient illumination is light that's been scattered so much by the environment that its direction is impossible to determine - it seems to come from all directions. Backlighting in a room has a large ambient component, since most of the light that reaches your eye has first bounced off many surfaces. A spotlight outdoors has a tiny ambient component; most of the light travels in the same direction, and since you're outdoors, very little of the light reaches your eye after bouncing off other objects. When ambient light strikes a surface, it's scattered equally in all directions.
The diffuse component is the light that comes from one direction, so it's brighter if it comes squarely down on a surface than if it barely glances off the surface. Once it hits a surface, however, it's scattered equally in all directions, so it appears equally bright, no matter where the eye is located. Any light coming from a particular position or direction probably has a diffuse component.
Specular light is the white highlight reflection seen on smooth, shinny objects. Specular light is dependent on the direction of the light, the surface normal and the viewer location.
Select the shadow Technique that must be used for the shadowing of the scene:
None: no shadow
Minimal: simple and fast shadow
Standard: normal shadowing with neat borders
Soft: normal shadowing with soft borders (blurred). More realistic but CPU intensive.
If Terrain is checked, the scene will cast shadows (any objects belonging to the terrain scene node). Use this option if you need hills and trees to cast shadows on the terrain.
If Models is checked, entity models will cast shadows on the terrain.
