I am not sure about the legality of game mods.

Most companies tolerate them, sometimes encourage them, as long is it is not disruptive. Cracks and cheats however are definitely illegal and companies often take action against people who write or use such tools, usually account bans, but there have been some lawsuits the game company won.

Fundamentally, there is no difference between a cheating tool and a harmless mod, and many mods are baltent copyright infringement using assets without a license. But because mods are generally beneficial to the company, they have no intention to use legal means to stop them.

This varies from country to country.

In the United States, it's legal to modify your machine to interpret the programs running on it other than the way intended by the machine creator and the program author (Lewis Galoob Toys, Inc. v. Nintendo of America, Inc, 1992). But every nation has its own system of laws and the precedents of one aren't binding on another (and I don't, personally, know if the Galoob v. Nintendo precedent extends to modifying the data on a PC or only protects the far-more-complicated approach of intermediating between PC storage and the CPU).

To my perception, the position of mods in the gaming ecosystem is mostly, for want of a better term, a "gentleman's agreement" or "gentleman's understanding." An awful lot of game devs got started by modding other games, and they feel more than zero empathy for the folks who are basically learning to be the next generation of developers, if not future employees. It's a bit akin to Adobe's position on cracked copies of Photoshop: they reserve the right to sue so companies can't just thumb their nose at their IP rights and use their product with no remuneration, but individual non-corporate users of pirated copies are, at worst, unpaid advertising for the product and, at best, future customers. Some game dev houses are exempt from this "empathy rule;" Nintendo is famously litigious (although even then, they tend to target projects that are, whether the developer knows it or not, in direct competition with Nintendo; AM2R puttered along happily for years until Nintendo decided to release their own Metroid 2 remake).