BuddyPress.org

Which readme.txt file are you referring to?

The one that comes with BuddyPress states this in the “Installation” section:

--- Plugins: ---



1. Upload everything into the "/wp-content/plugins/buddypress/" directory of

your installation.

2. Activate BuddyPress in the "Plugins" admin panel using the "Activate Site Wide"

or "Activate" link (both work).