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From EU3 Wiki
The mod folder is the game directory where mods are stored. In vanilla, the folder was not made when the game was installed. Instead you needed to make this mod folder yourself or download a mod that will install the correct directory structure. However, this is not true in the recent expansions, where the mod folder is premade using a dummy text file.
You can have more than one mod in the mod folder. The game launcher will detect all mods that are properly made in this folder and let the user pick which mod to play. Anything you add here will not replace the original game files. To keep your mod organized you should add readme files only in the modname1 or modname2 directory. This way if you have more than one mod in your mod folder it does not become a mess and you know that all readme and other files are in the modname1 or modname2 folders. If you choose to, you can place readme files in this mod directory. EU3 only looks at .mod files and folders in this directory. Mods do not have to be numbered as the game launcher does not require them to be. The example .mod files here are just numbered to provide a example of different mod names.
In this example we will use modname1 and modname2. These two folders represent mods, these folder names can be changed to anything. The subfolders in the mod folder need to be named the same as the .mod file. The name you choose will be what you see in the game launcher. One .mod file and one folder with the same name for each mod is all that is needed in this directory.
- mod\modname1 folder
- mod\modname2 folder