A few people have contacted me saying they get an error message saying "Can´t setup path, set VPROJECT to your game directory (e.g. D:/DEV/TF2) in your environment" or something similar. If you get this error message try downloading a different version of vtex from http://www.freewebs.com/team_zissou/vtex.rar
After pasting the .tga and the .txt into vtex just wait a couple of seconds and the .vtf will be in materials\backgrounds. I am still working on the reason the error appears in the first place. In my opinion it may be the OS or an interfering program.
Read all the comments before posting ;)
I found out the problem. They were trying to copy the image directly from the program they used to turn it into a .tga file instead of re-copying the one that was in their materialsrc\backgrounds folder.