BFM is “Basic Fighter Maneuvers.”  In the simplest terms, its dogfighting.  Two aircraft fight one-versus-one in scripted setups, starting from positions of advantage, disadvantage, and neutrality.

The objective is to teach a fighter pilot “close quarters” combat with his aircraft, though with the advent of high off-boresight missiles, the era of drawn out “BFM” (a la the last few minutes of Top Gun) may be fading.

See more terminology and jargon at Fighter Pilot Speak.