AddOns are generally self-contained User Interface (UI) modification components. However, some AddOns can be dependent on other AddOns to work, and some AddOns are actually collections of other AddOns. There is no size restriction on AddOns, some can grow to be quite massive.
In plain English, an AddOn for a game is just some files you can put in your game folder that can (theoretically) improve your interaction with the game (i.e. make it easier to play, or give you more information about what’s going on in the game).
Often the name modification (or “mod” for short) is used interchangeably with AddOn. More specifically, a mod is a third-party AddOn that alters or enhances some aspect of the game’s interface. Mods can perform a wide variety of tasks, including adding new buttons to the screen, altering the built-in player and party frames. In extreme cases, mods completely supplant the standard game’s interface, usually offering more advanced functionality.
Some mods are standalone, able to run without any additional software. Others are built on libraries, like the old Sea or Ace libraries. Still others, such as the old Cosmos, are compilations of many individually-developed mods.