As the DOELP (s. v. Vilar) points out, the name Vilar, frequent in the north of Portugal and in Galicia, indicates the part of the villa that was granted by the owner to clients or serfs for agricultural exploration; moreover, Formoso gives a clearer indication of the etymma of the adjective (Latin formosus ‘abundant form’, ‘beautiful’) than the sp. hermoso. 

Cited bibliography: 

-DOELP = Machado, José Pedro. Dicionário onomástico etimológico da língua portuguesa. Lisboa: Livros Horizonte, 2003, 3ª ed.