As far as what formats are best to use in general, I think the Wavefront .OBJ is one of the better ones to use (not only does basically everything recognize it, but Terragen is in that list!). But honestly, it's really the only one I've ever had to use, so...
I recently had a run-in with a program that exported Collada models, and I can say that it was... not good, at best. Actually trying to do anything with it - mesh smoothing, for example - resulted in the model actually looking worse than it did initially.
It's only recently that I've been pushed over the edge into full-time modelling - it was always more of a hobby I'd tinker with every now and then before - so I'm only now being exposed to the exportable formats. But even then, at work at least, it's a custom format that I never have to worry about more than mashing the 'Export' button over. Level art is much more... complex, but still all in custom formats.
I post this on the boards instead of PMing you in the hopes that someone far more knowledgeable than I can answer better.
But as far as importing into Blender, if you're using the .obj format, it's really as easy as finding the file and hitting Import. So far I haven't needed to use anything but the default import settings for that format (aside from changing the scale from 10 to 100 - unless you want it coming in at a tenth the size:P).