Step 1: Find a mod you want. The best place to get them is GarrysMod.org.
Step 2: Download the mod to your desktop or your downloads folder (whatever is easiest for you). If there is a SVN option available, see this section for information on how to download properly.
Step 3: Right click on the downloaded folder and click extract all. You do NOT need WINRAR. It is perfectly OK to use the Windows Extract Wizard. Just click next a few times then click finish.
Step 4: Read the README. That’s why it is called a Read Me. If it says specifically to place the mod in your Addons folder, copy the entire folder into “C:\Program Files\Steam\SteamApps*your username*\garrysmod\garrysmod\addons”. You can now delete the original .zip archive and the original copy of the mod (and its folder). Do not read the next few steps, as your mod is installed.
Step 5: If the README does not say to place the mod into your Addons folder, do not despair. It’s still easy to install your mod. Open the folder containing the mod. Now, open another window with the following address: “C:\Program Files\Steam\SteamApps*your username*\garrysmod\garrysmod”. There should be many folders and some miscellaneous files. If you are running Vista, skip to Step 7. If you are running XP, continue to Step 6.
Step 6: For Windows XP Only Go to the window containing the mod files. There should be some folders marked “lua”, “materials”, “textures”, “scripts”, etc… Enter the first folder and copy the contents. Paste them into the folder in \garrysmod with the same name. Repeat this for all folders within the mod. If there are extra folders that do not have a matching name in \garrysmod, ignore them. Run your game. Easy, wasn’t it?
Step 7: For Windows Vista Only Go to the window containing the mod files. There should be some folders marked “lua”, “materials”, “textures”, “scripts”, etc… Select all of the folders and copy/paste them into the \garrysmod window. A dialog will pop up asking if you want to merge, replace, or ignore. Select “merge” and wait for it to be done. YOur mod is now installed and ready to play.
If you did this right it should always work. MMichaud93 has made a video on the Windows XP method of installing mods. Here is the link - Video. If you have any questions at all just e-mail me at email@example.com and I will get back to you promptly.