Environment mapping is a texture mapping technique used to simulate reflection or refraction by modelling the background environment.

The texture stores the appearance of the distant environment surrounding the object.  This is typically implemented as a cubemap texture, which consists of six images arranged on the sides of a cube (like a skybox)

• In reflection mapping, texture coordinates simulate the reflection of the light off the surface.  Example:  Shiny guy in Terminator 2.
• In refraction mapping, texture coordinates simulate the refraction of the light through the surface. 

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