> Engine modules are compiled into the engine itself. They have full access to the internals, but you need to build and ship your own copy of Godot, including the editor and export templates for every platform.

I’m not familiar with distributing godot games. If I build a game to distribute on steam (for example) would this be an option? Or is a GDExtension (runtime loaded .so) the standard way to go?

It depends on what your use case is. GDExtension is the standard way to go, unless its API is too limited and you have to access/modify engine internals not otherwise exposed.

That being said, this has no impact on distribution either way as far as I know.

GDExtension is the standard way. But building a custom version of Godot is common and won't be a problem for distributing the game on steam or any platform. It's necessary to build your own godot version and export templates to produce an encrypted build not too easily hackable for example.