Essential it is just a texture that "bakes on" to whatever mesh object you are adding it to. For example makeup, tattoos, head skins, etc.
The idea of BOM itself and the process is not really new. This is exactly how we used to make tattoo layers for the original SL bodies. But now that most bodies are mesh, BOM is used to simulate the same thing. A simple .PNG file and 10L to upload is all it takes.
Hope that answered anything.