Yes, but it does procedural (perlin, etc.) terrains - no really good way to "design" your map.
I disagree Tom. You can import a bitmap into Terragen as a heightmap. A grayscaled image uses the brightness to say how high something is. I played around some with the old-SM maps and got the outlines done for all of the islands. I didn't put much effort into it, just wanted to see if it could be done.
