How Filtering Works
The Filter area is essentially a graph that represents gray level input from black to white horizontally, and gray level output from black to white vertically.
The default diagonal filter creates a graph where all values input as black are also output as black, and all values input as white are also output as white. That is why your Terrain Canvas appears unchanged - none of its gray level values have been altered.
By dragging in this Filter area, you can remap the gray values in your Terrain Canvas.
To see how filtering works:




As you can see in the Preview area, your Terrain Canvas is inverted. The original graph showed that all values input as black were output as black and all the values input as white were output as white.
The new graph you created now shows that all values input as black are output as white and all the values input as white are now output as black. In other words all the dark values are light and all the light values are dark.
In the new Filtering graph all values input at 0 are output at 255 and all values input at 255 are output at 0.
This is a drastic example. In most cases you would adjust more selectively, like lightening the mid tone grays or darkening specific gray values. Remember that this graph represents your Terrain Canvas, so you're changing the shape of your terrain object as you adjust gray values.
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