This tutorial will show you how to create liquids (Water, oil, ect.) for use in your game as an animated surface. Below is a
materials list:
Materials Needed
Most recent version of Paint.NET
Panelling and Ed Harvey Effects [2007-09-15]
Seamless Texture Maker Plug-in
For info on installing these plug-ins, click here
Step 1:
Find an image with some texture to it. For this, I used this wood texture.

Load this, or an image of your choice, into Paint.NET
Step 2:
Go to the Adjustments Tab, and then click on curves.

Under the curves dialog-box, click on the box that says "Luminosity", and change it to "RGB".

Uncheck the "Red" and "Green" boxes. Click up in the upper-left corner of the dialog box. This will make our picture blue, like water. After you get it to the wanted location, hit "OK".

Step 3:
Since our image is now blue, we must make it have a water-ish tone to it. To do this, go to Effects, then to Distort, then click on dents.

To add a water-like effect, set what the dialog box below shows you. Feel free to mess with stuff in the other tabs, but the first settings are needed.

Step 4:
Now, we have to give our water an alpha cannel, meaning it has a transparentcy to it. This allows you to look through the water, but still be able to see it. Without this, it only is opaque. To do this, go to Layers, the click on Layer Proporties. The following dialog-box will show. I find 200 to be a nice number. Don't worry, those boxes in the background only show how transparent something is. They aren't saved.

Step 5:
Remmeber that Seamless Texture Plugin? Well, this makes making textures that go together a lot easier. To get to this, go to Effects, Distort, and SeamlessTextureMaker

Step 6:
Now, we must save this image. To keep the alpha channel, we save it as a 32 bit targa image (.tga). Make sure RLE compression is unchecked.

Step 7:
That panelling plug-in comes to use here. It takes some math to use though. We want 8 frames with this, and the image is 128 x 128 pixels. So, 128/8 = 16, so we have a horizontal, verticle, or both change of 16 pixels. Remmeber to save each frame after you change it. (As a .tga)
And there you have it! Simply run it through H2Tool, and then follow other tutorials on how to use it.