Ken Musgrave's work on Terrain rendering is worth a look. He did similar things. The book 'Texturing and Modeling: A Procedural Approach' gives a nice explanation of a lot of the techniques and they used to give a course at SIGGRAPH on which the book was based but I can't find a link right now

I found this link discussing using Perlin Noise to generate artificial terrain:

http://www.vterrain.org/Elevation/Artificial/

It's quite common in procedural generated games to use perlin noise to create terrain (anything, really:).

My master thesis was about "PRNGs in game programming", and I've done 2d side scroller shooter with unlimited world generated on the fly using 2d perlin noise.

http://alan.umcs.lublin.pl/~ajuc/programy/gry/hw3/hw3.tar.gz

If anyone is interested there it is - written in C++ with SDL, libparagui and a few other SDL_* libraries. Probably compiling it will be hard - I've used libparagui that was in gentoo at that time, then I've learned it is patched version, and on other systems older version was in the package managers.

Still can't find a link to the SIGGRAPH talk but the libnoise tutorial is a nice example of how to code this sort of thing

http://libnoise.sourceforge.net/tutorials/tutorial3.html