Texture stage states are like a program (almost exactly pixel shader 1.1). First stage 0 runs, then stage 1, then stage 2, until a stage set to disable is found. Think of the stages as line numbers. On each stage you have two operations, one for color, and one for alpha, and you must always specify both.

One commands need only 1 argument, such as SELECTARG1, or SELECTARG2.

color = arg1
color = arg2

Some commands need two arguments, such as MODULATE or ADD

color = arg1 * arg2
color = arg1 + arg2

Some commands require 3 arguments, such as lerp or multiplyadd. The documentation and SDK disagree a bit here, one calling arguments 1, 2, and 3, the other calling them 0, 1, and 2. I can never remember if 3 is 0, or if 1 is 0, and 2 is 1, and 3 is 2.

You can also specify modifiers to some arguments, such as ALPHAREPLICATE, which will take the alpha of the source and treat it as a grey level, or COMPLEMENT which inverts the color. You can combine the two, effectively saying color = (1-arg1.alpha).

A stage may also write to a temporary output, then refer to that temporary value later, via D3DTSS_RESULTARG (write to "current" or "temp") and D3DTA_TEMP (read temp).

For simplicity (because I don't feel like looking up if addsigned treats both arguments as signed), I'll pretend your example just used add in stage 1. It translates to this:

color.rgb = texture.rgb;
color.rgb = color.rgb + texture.rgb;

or more correctly, it translates to this:

color.rgb = texture.rgb;
color.a = (whatever was last set, or the default, you really should specify something)

color.rgb = color.rgb + texture.rgb;
color.a = (whatever was last set, or the default, you really should specify something. The default is disabled, which is invalid as you have a color op.)

Stage 2 is probably set to disabled by default, but you really should set that too, otherwise more operations may continue to occur.