Here's an article, posted by Raf Cordero at Geek & Sundry, that talks about using insulation foam for terrain building.

This is amazing stuff that I've seen as an invaluable resource of miniature wargaming. Lately, I've been watching a friend's work with this stuff on her model railiroading layout. It's versatile stuff, and widely used in both hobbies.

An excerpt from the article:
'Trace irregular shapes onto your board with a pencil and then cut them out with your knife. Long narrow crests, big round hills, or weird irregular shapes are fine. Be creative'
That kinda said it all to creative! It's every much being a sculptor, really (I should know...I was one!) use much the same creative thought and execution, and it's not necessarily rocket science!

Especially in miniatures gaming, one of the things to always keep in mind is the miniatures you intend to use, and specifically the bases of the figures and vehicles. Think, 'How will this work with my tanks, or infantry, or setting up artillery on crestlines?'

For me, the critical advice was Step 3:

'Step 3 – Form the edges and ridges. Flip your knife over to the back edge and drag it along the sides and edges of your hills. You may have to push hard to get the foam to begin crumbling and flaking off, so take great care around sharp blades. If you have one, I recommend a normal kitchen knife or butter knife for this step. As you push, dig, and drag your tool across the foam it will begin to break and flake off, giving your hills the rough natural edges you want. In the picture below the foam on the right-side of the knife is clean after cutting, on the left I’ve started the ridge-making process. This step is messy so do it somewhere that’s easy to clean up!'
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...basically, making the crackly, crumbly rock face of the hill slopes.

The other thing you are keeping in mind is *stacking* ....stacking odd-shaped pads, building up your hills and mountains.

The possibilities are endless!