With the elevation tools, available under the E tab (2nd from the top), you can create hills and mountains on the map, and it's also used to create water: anything below a certain level is water. This also means that creating mountain lakes is, unfortunately, impossible.
On the right you see the sidebar for painting the elevation. You can ignore the two controls at the top of the sidebar called "paint" and "off-set" since they don't seem to do anything.
The main settings for the elevation are the four sliders halfway down the panel. The first two are "elevation" and "fine elevation", the latter two are "slope angle" and "slope dropoff"
The elevation level is how high the land is. A level of 1 indicates the default ground level. 0 is the boundary between water and land. Anything below zero is water, anything higher than 1 are hills.
The first two sliders set the elevation level. The first slider is used to select the elevation in increments of 1, the second is used to create a finer grained elevation level.
The slope angle (third) slider determines how steep your slope will be and can be set from 0 to 70. 0 means that you will be painting cliffs, if you set it to 70 you'll get very flat hills. The following image shows the differences in slope. From left to right, the slope angles were set to 70, 0, 20, and 45, respectively.
The fourth and last slider, slope dropoff, determines how "round" your hill will become. You can set it from 0 (no rounding) to 50 (spherical hill). Setting it too high may lock up the editor for a short time while the game is calculating the hill shape. This image shows two hills made with an angle of 45 for both and a slope of 0 and 40, respectively:
The buttons on the right determine how large your brush for painting elevation will be. The brushes are all squares and the sizes are as follows:
The cursor used for painting the elevation consists of two parts: a bright white center and a less bright area around it. The bright white part is the brush size and indicates the terrain that will be elevated to the set level. The lighter white part indicates that this area of the terrain will be elevated as well to get the desired slope angle.
To make a piece of your map all the same level (like a plateau), the best way to do that is set the elevation sliders to the desired level, and set the other two sliders to 0.
In addition to painting by clicking and dragging, there's another way to change the elevation: if you right click on the map and move the mouse up and down you can change the elevation of that area only from deep see to high mountain and back.
Finally, the "Buildable tiles" button will highlight in red any tiles on the map that are not buildable. This is a very handy tool for smoothing out your elevation in places where you want the player to build. One thing to note is that the buildable tiles will not be updated automatically: if you change the elevation, you need to turn this button off and back on again to see the changes you made.