The mountain peak overlay is made from a reasonably rough 128×128 or 256×256 fractal (depending on desired size). This fractal is made by a modified diamond-square algorithm in which the edges smooth to zero such that no seams are visible when it is overlaid on the heightfield.
Note that you do not necessarily need to put down a special mountain overlay to get a mountain peak. You can get quite nice mountains just by setting the 'alt' and roughness parameters in the design map. Below is a mountain generated by just such a procedure.