Mods in this sense are unofficial cars created by third parties. All the handling, the car models, skins etc are defined by the creator. It does mean that the creator has to make a few guesses to try and approximate real life lap times, rather than being able to co-operate with the manufacturer. I don't think full on realism is that important in F1 though
edit: you should be able to download most of the real f1 tracks as well for most games