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. If you save files on your desktop, or have shortcuts there, you may want a wallpaper image that is made more for a background image so you can see your files and shortcuts easier.

How are they installed?

Just download an image you like, save it on your hard drive, and make it your wallpaper image.

To be a little more specific:
Windows users:
The default location for wallpaper images is in your C:\Windows directory. Any images saved there will automatically be available as a wallpaper, but you can use the browse option to select a picture from anywhere. Just right-click on your desktop, select "properties", then go to the "desktop" tab and change your background image.

Mac users:
Click on the Apple icon on your screen, then go to "system preferences", then click "desktop and screen saver". From there you can browse your computer and select the image you want for your wallpaper.

What size should I choose?

Wallpaper images here are 1024x768 and 800x600. Any size can work, but the one that fits your monitor resolution will be best. You don't need a large one for a low resolution monitor, and a small one on a high resolution monitor will be grainy. I will put smaller ones for mobile devices here later.

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 work on most systems, but not all of them. 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, live somewhere with high connection costs, or have very little free hard drive space, the jpg's are much smaller.