diff --git a/known-bugs.txt b/known-bugs.txt
index e8f691382c..b20b138903 100644
--- a/known-bugs.txt
+++ b/known-bugs.txt
@@ -407,3 +407,9 @@ Settings not saved when OpenTTD crashes [FS#4846]:
 	saved, and you need to run a version that crashes regularly, then
 	you can use the 'saveconfig' command in the console to save the
 	settings.
+
+Not all NewGRFs, AIs, game scripts are found [FS#4887]:
+	Under certain situations, where the path for the content within a
+	tar file is the same as other content on the file system or in another
+	tar file, it is possible that content is not found. A more thorough
+	explanation and solutions are described in section 4.4 of readme.txt.
diff --git a/readme.txt b/readme.txt
index c2a869b869..e37630c6bd 100644
--- a/readme.txt
+++ b/readme.txt
@@ -1,5 +1,5 @@
 OpenTTD readme
-Last updated:    2011-12-05
+Last updated:    2011-12-22
 Release version: 1.1.4
 ------------------------------------------------------------------------
 
@@ -15,6 +15,7 @@ Table of contents
  * 4.1) (Required) 3rd party files
  * 4.2) OpenTTD directories
  * 4.3) Portable installations (portable media)
+ * 4.4) Files in tar (archives)
 5.0) OpenTTD features
  * 5.1) Logging of potentially dangerous actions
 6.0) Configuration file
@@ -324,6 +325,30 @@ media to.
 As always - additional grf files are stored in the newgrf/ dir (for details,
 again, see section 4.1).
 
+4.4) Files in tar (archives)
+---- -----------------------
+OpenTTD can read files that are in an uncompressed tar (archive), which
+makes it easy to bundle files belonging to the same script, NewGRF or base
+set. Music sets are the only exception as they cannot be stored in a tar
+file due to being played by external applications.
+
+OpenTTD sees each tar archive as the 'root' of its search path. This means
+that having a file with the same path in two different tar files means that
+one cannot be opened, after all only one file will be found first. This is
+done to make it possible to have the large 32bpp zoomed graphics in a separate
+file to the (relatively small) unzoomed 8bpp NewGRF. As such it is advisable
+to put an uniquely named folder in the root of the tar and put all the
+content in that folder. For example, all downloaded content has a path that
+concatenates the name of the content and the version, which makes the path
+unique. For custom tar files it is advised to do this as well.
+
+The normal files are also referred to by their relative path from the search
+directory, this means that also normal files could hide files in a tar as
+long as the relative path from the search path of the normal file is the
+same as the path in the tar file. Again it is advised to have an unique path
+to the normal file so they do not collide with the files from other tar
+files.
+
 
 5.0) OpenTTD features
 ---- ----------------