Normal data is one of the more expensive assets of games. Creating normal data in Z Brush or mudbox can easily make up for a few million dollars.
Storing normal data in textures in a way that preserves the original data with the lowest error level is an art form that needs special attention.
I am now aware of three ways to destroy normal data by storing it in a texture:
1. Store the normal in a DXT1 compressed texture
2. Store the normal in a DXT5 compressed texture by storing the x value in alpha and the y value in the green channel .... and by storing some other color data in the red and blue channel.
3. Store the normal in its original form -as a height map- in one color channel of a DXT1 compressed texture with two other color channels.
They all have a common denominator: the DXT format was created to compress color data so that the resulting color is still perceived as similar. Perceiving 16 vectors as similar follows different rules than perceiving 16 colors as similar. Therefore the best -so far- solutions to store normals is to
- not compress them at all
- store y in the green channel of a DXT5 compressed texture and red in the alpha channel and color the two empty channels black
- use the DXN format that consists of two DXT5 compressed alpha channels
- store a height map in an alpha channel of a DXT5 compressed texture and generate the normal out of the height map.
The DXT5 solutions and the DXN solution occupy 8-bit per normal. The height map solution occupies 4-bit per normal. It is probably not as good looking as the 8-bit per normal solutions.
There are lots of interesting areas regarding normals other than how they are stored. There are challenges when you want to scale, add, modulate, deform, blend or filter them. Then there is also anti-aliasing ... :-) ... food for thought.