What it is actually doing
A coloured point cloud already contains a picture of the site; it is just stored as several million individual samples rather than as a grid of pixels. This imposes a grid on it, averages the colour of the points that fall in each cell, and writes the result as a georeferenced image.
The same pass can produce a surface model from the same cells, which is the reason to do it here rather than in two steps: an orthophoto and a DSM built from one grid line up exactly, pixel for pixel, with no resampling between them. Tick both on the DEM page and you get both.
What it is not
It is not an orthomosaic. An orthomosaic is built by projecting the original photographs onto a surface, so its detail comes from the camera — centimetres per pixel, regardless of how many points the cloud holds. This is built from the points, so its detail comes from the point spacing. Where the cloud is dense the two look surprisingly close; where it is sparse this one is visibly blockier, because it is showing you exactly as much as was measured.
What it is good for: a base map that matches the cloud exactly, a drape for a terrain view, a quick look at a site without opening anything large, and any case where the photographs are not available any more but the cloud is.
Things worth anticipating
- Building edges are soft. A cell at the edge of a roof contains both roof points and facade points, and the average of the two is the colour it gets. This is the cost of averaging rather than taking the topmost point, and it is a much smaller cost than the speckle the alternative produces.
- Overhangs win. Anything above the ground contributes its colour to the cell it is over, so tree canopy covers the ground beneath it, exactly as it would in a photograph taken from above.
- Gaps are transparent, not black. Cells no coloured point landed in carry alpha zero. Software that ignores the alpha band will show them as black, which is worth knowing before assuming the image has a hole burnt in it.
- Noise and withheld points are dropped first, so a flagged bad return cannot contribute its colour either.
Check it before you use it
The image is shown in place before anything is downloaded, and the hillshade from a surface model can be laid over it if you build one at the same time — which is the fastest way to tell a real feature from a colouring artefact. Coverage is reported as a percentage, so a cloud that is patchier than it looked in 3D shows up as a number rather than as a surprise later.