If you aren’t zoomed in far enough, the tools on the 3D Analyst toolbar are disabled. By default, they’re only enabled when the terrain is displayed at full resolution. Based on how the terrain’s pyramid was defined, this will occur at display scales of 1:2,500 or larger. You can enable the tools at lower resolutions from the Analysis tab of the terrain’s Layer Properties dialog. When you enable the tools at LODs lower than full resolution, the accuracy is also decreased. Interactive tools always operate at the current display resolution. This is useful if the full-resolution terrain is oversampled for the requirements of the analysis.