What are wallpapers?
A wallpaper is an image you can place on your desktop. When you have nothing running, or you have your program windows minimized, you can look at an image of your choice.
How are they installed?
Just download an image you like and put it in your C:\Windows directory. Macintosh users, sorry, I've never used a mac.
To be a little more specific:
What is the difference between .bmp and .jpg.
The bmp images will work on any windows system and probably on any other system also. The jpg images only work if you have your desktop set to work as a webpage (active). If you have an image editing program you can download the jpg versions and convert them to bmp if you need to. My jpg's are low compression to keep the image quality. Since bmp's work for anyone, jpg's aren't really needed, but if you are on a dialup connection, or live somewhere with high connection costs, the jpg's are much smaller.