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A tile is a 10x10 meter region, the smallest building block for an area. Tiles are chosen from the area's tileset, with each tile depicting a different feature of the landscape, such as a road, hill, tree, house, well, rock, water, chasm, or wall.
This tile-based terrain system has a number of significant advantages over the use of arbitrary mesh. From a purely technical standpoint, it significantly decreases load times, minimizes bandwidth usage, and optimizes pathfinding while in-game. From an artistic perspective, any map created in the Toolset will look good and make sense because the tiles automatically line up and fit together. From an ease-of-use perspective, this system allows areas to be painted in a matter of minutes, freeing time for important role-playing elements like story, dialog, and scripting.
There is some overlap between what is depicted by a tile and what is depicted by a placeable. One major difference between these choices is that nothing depicted by a tile can be selected by a player. Another difference is that, since tiles provide the walkmesh, it is more efficient to use a tile to depict things that affect where creatures can walk. Tiles also support "tile fade", allowing the top of a particularly tall object to be hidden when it might interfere with the view of a player. On the other hand, placeables allow more flexible placement, giving more visual variety with fewer building blocks.