This is a quick demonstration of a prototype for a megatexture editor I made for Unity and Photoshop.
The idea is you can have an infinite number of levels. The world is broken into 512×512 textures. Nearby quads use the fullsize textures, but faraway quads uses a smaller 64×64 texture. The large textures are streamed in and out of memory as needed.
When you click “Edit Parallax Layer” in Unity, a Photoshop script combines the various elements allowing you to edit a combined group of 9 textures as if they are seamless. Then, when its time to export, another script slices everything back up and places them in the appropriate folder (with the appropriate name) so that they are immediately visible in Unity.
I expanded on this when making tools for Wayward at AtomJack games.