A .dds file is a compressed image file used by Neverwinter Nights for some textures (the colors painted on 3-dimensional objects). These are used in preference to .tga equivalents if both are available and if the user's graphics card supports the .dds compression. (Most current video cards do, but many at the time of the game's release did not.) The file format used by Neverwinter Nights is not identical to that used by other applications, even though both might use the ".dds" extension and both likely use the same type of compression.