.pak files in this context function similarly to .zip or .rar containers but are often proprietary in their header structure. They typically utilize high-compression algorithms such as LZMA or Zstandard (zstd) to minimize the storage footprint on solid-state drives (SSDs) and hard disk drives (HDDs).

When you install a mod, it typically involves altering the contents of this file or replacing it with a modified version to change how the game looks or plays.