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I have a DEM (xyz format) which I want to apply to a "flat" map texture to create a shaded relief, preferably with software that is available for free.

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See gdaldem, which you can use from a command-prompt:

$ gdaldem hillshade dem.xyz hillshade.tif

There are also a few other interesting modes with the utility that are worth exploring.

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QGIS and GRASS !

See this question.

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Thanks for providing these details. However I did not work with these programs yet and they seem to be pretty complex. Do you have and hints for the workflow I have to use? Especially: How do QGIS and GRASS work together and how can I add my texture layer to be shaded? –  leepfrog Feb 3 '13 at 23:58
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Saga GIS is worth a look. It is reasonably intuitive and has a GUI and is free. There is a good gentle introduction here, which I found instrumental in getting up to speed nice and quickly.

The modules that would be of particular interest (in version 2.0.8) would be:

  • Import/Export - Grids - Import Grid from XYZ
  • Terrain Analysis - Lighting, Visibility - Analytical Hillshading
  • Import/Export - Images - Export Image (bmp,jpg,pcs,png,tif)
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