How do Unity recognize trees and other things

What is the argument used by the engine to know if the object can be used as a tree,grass or detail? I wanted to know this because i imported a tree, and it was impossible to use it as a tree in the terrain. I was able to select it, but it wasn't spawned when i used the tree tool. So i was asking myself, what does Unity use to know?

As far as i know the grass must be an image, and trees must have LOD. What else? Also, correct me if i am wrong, because i think it recognizes more by searching if the model has a lod. Thanks =)