If by mods you mean custom content, then:

For tracks: All players must have the track (the one the host picks and plays) in their folder. If some of them don't, they will not be able to play that track and will stay immobilized on the start line, they will see a prompt "host started a race with unknown track", their car will quickly have its collisions turned off (will start ghosting/blinking) and they will have to wait for another track/race to be started in order to play.

For cars: anyone is able to pick and play whatever they have in their cars folder, but other players can see their custom car only if they also have that car in their folder. If they don't, they see a "mystery" car driving around instead of some custom car, but gameplay is possible.

For skins: same as with cars, if you use a custom skin, others must have it too for them to see your skin, otherwise they will see you in stock colours.

So in short: it's all locally based and loaded from the local machine, there is no file transferring from host to joiners. Everyone has to download and paste the custom content to play it, especially tracks (if you don't have the track = game can't find&load it = you can't race it), and also to use cars and skins and to see others use custom cars if they use them and to see skins they pick.

Thanks! Another question, I remember back in the day of Re-Volt 1.2 there were mods for 1.2 and for Wolf-something (don't remember the name sorry) and they were not cross-compatible. How is the mod compatibility for those on RVGL? Is there anything I need to check out for before downloading cars for RVGL?