How do mods work?

UI = User Interface
Sim = Simulation

A UI mod affects only your computer, it affects how you interact with the game. It can change how information is displayed to you (for example on the scoreboard) and it can turn things on and off for you, like it could sometimes turn your radar off to save power.

A SIM mod can make much more serious changes to the game for all players. For example, a SIM mod could change the amount of HP that a tank has or add new units. A SIM mod could change how the scoreboard looks to every player. Games with SIM mods are unrated.

Each player can choose their own selection of UI mods, but SIM mods (which can be activated in custom games by the host) need to be identical for every player in a game.

That is because each player's computer is simulating the entire game and they must stay synchronized. It would break ("desync") the game if, on your computer, a tank had 300 hp, and on your teammate's computer, the tank only had 250hp. To ensure this, when you join a lobby with activated SIM mods, your client will automatically attempt to download and activate (only) those mods.