Based on an issue and a patch in Clear TK, it seems like BILOU stands for “Beginning, Inside and Last tokens of multi-token chunks, Unit-length chunks and Outside” (emphasis added). For instance, the chunking denoted by brackets
(foo foo foo) (bar) no no no (bar bar)
can be encoded with BILOU as
B-foo, I-foo, L-foo, U-bar, O, O, O, B-bar, L-bar