DropDMG 3.1 (http://c-command.com/dropdmg/) is the latest version of the utility that allows users to create .dmg and .img disk image files on Mac OS X. The utility is now faster at creating large disk images under most circumstances and compresses disk images a bit more tightly.

DropDMG 3.1 adds a “Use less temporary disk space” preference, so that you can make DropDMG operate in the older, slower mode if your destination volume is running out of space. Disk image layouts can now contain text boxes, with your choice of fonts, styles, colors, and shadows, so it’s no longer necessary to fire up a graphics program to update the text in your background picture.

Layout text boxes inDropDMG 3.1 can contain placeholder variables, which DropDMG will replace when creating the disk image. The “Mount Image…” command now has a “Shadow file” option that lets you mount a read-only disk image as read-write. Any changes made to the mounted image will be written to the adjacent shadow file.

The Preferences window now supports full screen mode (this requires Mac OS X 10.7). DropDMG 3.1 adds a “Burning a Lion Installation DVD” section to the manual.

DropDMG can encrypt images and post-process them with GZip, BZip2, or MacBinary. It can create images with rich-text license agreements, and also supports segmented images and images that auto-open when you mount them.

DropDMG 3.1 requires Mac OS X 10.5 or higher. It costs US$24 for new users and $12 for DropDMG 1.x and 2.x owners. Version 3.1 is a free update for those who bought 2.x on or after June 20, 2008). A demo is available at the product web site.