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What are Drupal Modules
A Drupal module is a set of PHP files and configuration files, packaged together in a folder. When you place a module folder in a location where Drupal knows to look for them, Drupal will automatically discover it.
Once Drupal has discovered the module, it is listed at Administration > Extend where you can active it. The act of activating a module is called installing a module in Drupal terminology.
Where module folders are to be placed exactly is discussed in Creating a Module.