99.99% of the time-
Most mods are installed outside of the main install and go into the Saved Games folder.
These add content like Liveries, ground, land and sea community made content.
Stuff that goes in the main install are stuff that edit content like the scenery mods from Mustang and Starway. With these when you update the game they are moved into a separate folder and the original/new files replace them.
With the OVGME and JSGME you can install and uninstall mods with ease.