DXT1-5 formats are also called BCn formats (it ends with numbers but not exactly the same ones) and BC stands for block compression. Pixels are not stored separately, it only stores a block of data for the equivalent of 4x4 pixels.
The 1st line checks if it's DXT1, because it has a size of 8 byte per block. DXT3 and DXT5 have use 16 bytes per block. (Note that newer formats exist and at least one of them is 8 bytes/block: BC4).
The 2nd rounds up the dimensions of the texture to a multiple of the dimensions of a block. This is required since these formats can only store blocks, not pixels. For example, if you have a texture of 15x6 pixels, and since BCn blocks are 4x4 pixels, you will need to store 4 blocks per column, and 2 blocks per row, even if the last column/row of blocks will only be partially filled.
One way of rounding up a positive integer (let's call it i) to a multiple of another positive integer (let's call it m), is:
(i + m - 1) / m * m
Here, we need get the number of blocks on each dimension and then multiply by the size of a block to get the total size of the texture. To do that we round up width and height to the next multiple of 4, divide by 4 to get the number of block and finally and multiply it by the size of the block:
size = (((width + 3) / 4 * 4) * ((height + 3) / 4 * 4)) / 4 * blockSize;
// ^ ^ ^
If you look closely, there's a *4 followed by a /4 that can be simplified. If you do that, you'll get exactly the same code you had. The conclusion to all this could be comment any code that's not perfectly obvious :P
The 3rd line may be an approximation to calculate a buffer size big enough to store the whole mipmap chain easily. But I'm not sure what this linearSize is; it correspond to dwPitchOrLinearSize in the DDS header. In any case, you don't really need this value since you can calculate the size of each level easily with the code above.
