All of the files in the BGM folder are .MIDI I'm assuming that they have to be, to have them play. so what do you guys use to make these files. and how do i convert files to that format without buying expensive programs.
BGMs can be either .midi, .wav or .mp3. Midi is a special kind of filetype not unlike sheet music in the real world. It does not actually contain any sound, but rather a series of tracks with the notes its instruments would play, and the computer generates the sounds when you play the file. Because of this unique difference, .midi files can be a huge amount smaller than common music files, often as small as a few kilobytes compared to several megabytes for most .mp3s.
If you do decide to edit or even compose your own .midis, you could try a bunch of programs. One free program is Anvil Studio, which is pretty basic but will get the job done, but there's a bunch of commercial products such as Fruity Loops that offer much more advanced functionality for a price. Hope this helps!