With regard to The Sims series, the term entered common usage with The Sims 2. For example, a mod could allow children to cook, or teenagers to WooHoo and become pregnant. Mods mainly alter gameplay values or add/change already existing features. This distinguishes them from 'hacked objects'. However, they are not in-game objects such as clothing or new decorative objects, though some mods use an in-game item to enable or disable their features. Mods are a form of custom content in that they must be downloaded and their file(s) must be placed properly. Mods are used to alter one or some of a game's features, or even to introduce new ones.
Mod is short for modification, or, in this case, game modification.