RenderMode 1 uses a bump map to produce the illusion of 3D. This render mode is mainly for generating a quick preview of the finished work, but at a lower quality.  However, RenderMode 1 may save time and be sufficient for some scenes that do not show the terminator line and are not of extremely high resolution.  Also notice that the surface is perfectly smooth and there is no bumpiness along the horizon, regardless of zoom level.

It is not 'real' 3D.  It is similar to a sphere as smooth as a cue ball with an image projected onto it to produce the illusion of 3D.  That is why it cuts off sharply at the terminator.  The projection cannot go beyond the edge of the smooth sphere and illuminate features even slightly above the surface or beyond the projection horizon. 

RenderMode 2 applies an isosurface with a height field to achieve a real 3D surface structure to be shaded accordingly and illumination can reach over the horizon.

Notice how much more natural the terminator (shadow line) looks by comparison to RenderMode 1.  Upon rendering it, you will also notice that it takes quite a bit more time to render.

The mathematics behind the height field rendering are much more complex but more accurate than bump map computations.  It takes longer to render, but the program handles those details automatically.  When zoomed in more closely, the horizon will appear bumpy due to irregular craters, valleys and mountains just along and over the edge of the horizon.

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