Multi-texturing uses two textures for each fragment. The example uses
GL_TEXTURE0 as the regular texture color and a second texture as the
alpha mask. Since there are two textures they can have separate
filtering an wrapping parameters.
The color texture uses GL_MODULATE which combines it with the existing
color. The alpha mask uses GL_REPLACE which causes it to replace the
linearly filtered alpha mask from the color texture with a hard-edged
alpha mask that is clamped to transparent at the border.
This is similar to how drawing is done in NASA World Wind