Texture Compiler Questions

Hi,
How do I convert texture form .DDS to .TEX with the “TextureCompiler.exe”.
When I drag and drop them into the program it does nothing.
What king of dds does it allows ?
DDS1, DDS2,DDS3 ?
With what kind of compression ?
Thanks

It is command line tool. For example:

In command line window:

texturecompiler sourcefile.jpg destfile.tex -format dxt3

Edit: You can check type of compression (and other informations) for particular image file in TexViewer under View->Info