The standard Windows and Mac colour pickers do not correct for the gamma of the screen, so the values are not in a linear colour space. E.g. a G value of 100 is not half the brightness of 200, it actually produces much less than half the brightness. That is just the way most computer screens work or are setup to work for legacy reasons.
Inside the renderer it's important to work in a linear colour space so that 0.5 really means half the amount of light of 1. The RGB values you see in Terragen's XML document are in a linear colour space. A value of 1 usually means 100% albedo or reflectivity (unless it has some other meaning such as light intensity or luminance), and 1 is mapped to 255 in OS colour pickers. When you edit a colour in the colour picker, the linear RGB values are first gamma corrected by 2.2 (i.e. raised to the power of 1/2.2), then multiplied by 255, then it shows those values in the colour picker. It does this so that the OS colour picker showing on your screen shows a colour which is similar to the intended colour in linear space. When you are finished editing a colour, the inverse happens. They are divided by 255, then raised to the power of 2.2 (because that's approximately what your screen does to the light it sends to your eyes) and then you have linear colour space values which can be used by the rest of the renderer.
It can get a lot more complicated, but that's how it works in Terragen 2 at the moment.
