I am quite new to game development, and I have gone from throwing out XNA and Torque. I am looking into 3D Game Studio using Lite-C. On the other hand, I have played PS2 games such as Jak and Daxter (I know that they are old), and I am wondering a few things. Looking at this game's terrain, it is very different in that Jak and Daxter have to jump up onto cliffs, etc. Most terrain generators look like they cannot handle this type of terrain. I went to the Jak and Daxter site, and it looks like the cliffs and mountains are models placed onto a flat terrain. Am I correct about this, or could someone enlighten my how this game's terrain was built.

The most generic terrain type uses a height map. Every arbitrary distance in horizontal space is represented by a single height value. That means no two points in horizontal space can overlap each other. Land doesn't overlap land.

Things get more complicated when the terrain can overlap itself. Some games may choose to use generic terrain, but cut holes in the landscape, then fit seperate models into the holes to make caves and cliffs.

Some games don't bother cutting holes. They just sit other models on top of the solid ground. This type of setup would make underground passages almost impossible without a doorway to teleport the player somewhere else (as in Morrowind). In both cases, a cliff that overlaps other land is definitely a model that is seperated from the ground. If you look closely, you'll probably be able to find the intersection lines, which are usually covered up by foliage and loose rocks.

It's entirely possible to build a terrain engine that can overlap itself, and since I haven't played the games you mentioned, I can't be sure how they have it set up.