In its stock form, Windows 11 supports quite a lot of different formats for desktop backgrounds. You can use JPG, PNG, GIF (static only, no animation support without third-party apps), BMP, TIFF, and HEIC (if the necessary codecs are installed). Soon, another format will make it to the list, allowing you to use even more images as wallpapers.
In the recent Windows 11 preview builds, Microsoft added a new format without much fanfare. If you are on build 26220.7653 and newer, you can use the WEBP format as your wallpaper:
You can now set .webp images for your desktop background in Settings > Personalization > Desktop Background.
For reference, WEBP is a relatively new image format that offers several benefits over well-established formats like JPG. It is much more storage efficient, supports transparency, and even animations. In recent times, it became a go-to format on websites as a way to optimize the size and quality of images across the internet, and now, Microsoft is improving its support in Windows 11.
In all fairness, stable Windows 11 builds also let you set WEBP images as desktop backgrounds, but the process is less apparent. Most users are accustomed to setting their wallpapers by right-clicking a picture and selecting "Set as desktop background" or navigating to Settings > Personalization. None of those options supports WEBP, but if you open such a picture in the Photos app or third-party viewers like Visum (my favorite free alternative to the resource-heavy stock Photos app), you can select Set as > Desktop Background or Lockscreen.
With Windows 11 build 26220.7653 and newer, Windows 11 lets you set a WEBP image as a desktop background in the Settings app and by right-clicking it in File Explorer, which is a small, but welcome and convenient change.
As for more significant changes for desktop backgrounds, there are rumors about Microsoft implementing animated backgrounds, which have yet to materialize. There were reports about Microsoft adding a parallax effect to desktop wallpapers, but they are still missing in the latest updates, including preview builds.