The Data Files folder is where you'll dump most mod files (it's located at Steam/steamapps/common/Morrowind/DataFiles by default). Most mods come in a package with folders named "textures", "meshes", "sounds". etc. It depends on what the mod adds or changes. It will also usually include an .esp file. All of those things need to be put into Data Files. You'll be asked if you want to merge folders, and the answer is always a hearty yes. That's really all you have to do for basic mods. I've never tried any mod managers.