TXD files are RenderWare compression texture archives with the .txd extension which are used by Grand Theft Auto games from the GTA III Era to store images and other textures used throughout the game.
A number of tools have been developed by members of the community to open .txd files and extract/replace the textures, allowing for the modification of the game's appearance. The most notable is TXD Workshop which is developed by Delfi. Some links to this and other tools are below.
Most TXD files are stored inside the gta3.img archive.