Thanks guys
HDR = High Dynamic Range. Your eye can see a lot more tonal range than what can be captured with a camera. Usually a sacrifice is made to either blow out the highlights to get some shadow detail, or sacrifice shadow detail in order to preserve the highlights. But our eye can see the whole scene.
HDR processing involves taking multiple exposures - at it's simplest form, 2 exposures - one exposure for the highlights (where shadow detail is lost), and one exposure for the shadows (where highlights are blown out). The two exposures are then blended together so you get the whole dynamic range in your image.
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Originally Posted by sheeny
How does this processing compare with the highlight/shadow adjustment in PS CS2?
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The shadow/highlight feature really just compresses the histogram - it can't recover data that wasn't there in the first place. If you sky was overexposed because your camera metered on the foreground, you can't recover that data.
By taking 2 exposures, where each exposure properly captures the detail, you get a full histogram with detail preserved at either end.
The techniques (with some nice example shots) are described here:
http://www.luminous-landscape.com/tu...blending.shtml
Just do a google on "photoshop blend exposures", and you'll find a number of other websites which describe techniques to achieve the same result.