BMP, short for bitmap, is an uncompressed image format. BMP image files are generally very large in size and unsuitable for most purposes, though they can be used for textures before the textures are converted to VTF format.
A better alternative to BMP is PNG, as this format uses lossless compression techniques to perfectly preserve the image in a lower file size.
TGA (Targa) files are widely used for texture creation/saving before conversion to VTF. TGA files are generally uncompressed and take up similar amounts of space to BMP files.