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You could use Particle System with Clouds texture (or any texture, even hand painted) to do this.

Steps:

1. Add Particle System to your terrain (and set it as screenshot below shows).

2. Add texture to this Particle System.

3. Go to Texture tab, select created texture (and set it as screenshot below shows).

Settings:

Blend file:

http://blend-exchange.giantcowfilms.com/embedImage.png?bid=1858