This following guide applies to Race 07. Other games (especially Stock Car Extreme and rFactor) may be very similar, or vastly different, but follow the same sort of formula.
There are 3 types of mod. Cars, Tracks, and Other.
When you download the mod from the FTP or wherever else, it'll be in a compressed file format, usually .zip or .rar, although .7z is becoming more popular with it's more efficient compression algorithm, or it's probably best you grab 7zip which can handle all of them.
Mods of this manner should be installed to the Race 07 folder (yours may be called Race07 or race07 or simply race) within your Steam directory at:
The contents of car mods are installed to two places. If the modder has packaged their mod nicely, the contents of the compressed file should mirror the file structure of your Race 07 folder.
The GameData folder consisting of the car models, textures, data, teams and drivers files should be placed in the...
...folder, ideally kept within a folder of their own named for the car or group of cars held within.
The mod may include a folder titled UIData, which contains the images for the menu screens, including car logos for the menu buttons, etc. These need to be placed in the...
Now... each car model in Race 07 has a Car ID assigned to it (List). This is a 3 digit number starting at 001, and going up to 255. All the cars in the game (and DLC expansions) proper have been assigned unique ID numbers, as you assume they would be, otherwise the game wouldn't work and you'd want your money back.
However, user-made mods also require their car models to be assigned a unique ID number. Given the amount of mods out there, and the finite amount of Car ID numbers there are, it's well within the realms of possibility that two different modders might give their different cars the same Car ID number. If you have 2 cars mods installed that contain cars with the same ID number, the game will get confused and fail to load. This especially becomes a problem if you're trying to join a multiplayer online server, as the game will kick you for not having the correct content in the same configuration as the host server.
If this is the case, there are 3 options. The first is to find the file that contains the car ID number and change it. This isn't recommended. The second option is to simply remove the mod with the clashing car ID number that you don't need, leaving the mod that you do need to take that number uniquely. Do this by grabbing the entire folder of the offending car mod, and moving it out of the Teams folder in your Race 07 directory and placing it elsewhere until you need it again. The third option is to install something like Sim Racing Manager which lets you pick and choose which mods you wish to run each time you start the game up. It is in French, however.
Track mods are installed the same way as car mods, but slightly different places. The folder named for the track you are installing should be placed in the...
...folder. The MenuData fodler containing the menu circuit maps (and possibly a video file) should be placed in the...
Editing the text files... Don't.
If you get curious and start to poke around in the various track data files that are viewable in a text editor such as notepad, you'll notice that you can change certain aspects of the circuit, such as the location name, flag, fastest lap and category in which the circuit is located which are all aspects of the track selection screen. This is not advised, as it will cause your own files to likely be different from everyone else's or a host servers, meaning you'll be kicked for running files different to other drivers or the host server.
Although those of us (including myself) with an OCD complex regarding neatness in our files may feel the urge to align all the mod names and categories so they're correct and up-to-date in our own minds. Just don't. Although fine for offline play, you won't be able to join any multiplayer races hosted by the server or another player, and no-one will be able to connect to you if you host a game because the files won't match. Add to this the likelihood of the game crashing because you've changed something you shouldn't have, it's better to grin and bear it and leave any mods as they are when you unzip them.
There are other kinds of mods on offer, some might change the in-game UI, or improve graphical elements such as headlights or menu backgrounds or other such things. Best practice for these is to follow the readme file that's likely included in the download, or install them following the same folder structure they'll likely be in in the zip file.
As with any mod that overwrites an original game file, it's a good idea to back up that original game file so if you make a mistake or don't like the changes the mod makes, you can return the original file without needing to completely reinstall the game. It's also a good idea to make a note of which mods you have installed and where their data is so you can remove it if necessary if it clashes with another mod or causes game crashes, etc.