Lightmaps are PICTs that Ferazel's Wand uses to give portions of your level custom, unique lighting. They are created in the same fashion as in pixmaps, except you should use 256 colors when creating them. Paint your level is varying levels of grayscale, with black representing pitch black (literally so, if you play a level lighted that way) to daylight (outside light).
Once you're done, paste it into MASCOT using "Paste PICT as Lightmap" in the Edit menu. You may need to do trial-and-erroring to get good results.