Modding your mods lets you build on top of the work done in existing mods. For example, copy an existing game mod and customize/override the components you need or start from scratch and link-in components from other mods. Modding mods allows you more flexibility in sharing components between mods by either linking them in or by copying them into your mods. The following is a short example of modding a mod.
The most common way to mod a mod would be to first start by selecting a mod and copying it using the Copy link on your mods list:

Then when you view your mod you will notice that all the components present are linked in rather than included in the mod itself. This example is based on the mod created in the “New Feature: Game Mods” blog entry below. Here I am going to change just the player colors but leave everything else in the mod the same. So to start I will click on Customize next to the Player Colors mod component:

After I’m done customizing the colors when I return to the mod page I can now see that “Linked-in” column no longer indicates that this component is linked in from the other mod:

When I view the mod map I can visually see in the legend that the player colors are no longer shades of grey (compare with the image from “New Feature: Game Mods” below) and also that my setup scenario is still part of the new mod:

That is all there is to modding mods: [1] selecting a mod [2] copying it [3] customizing / adding the components you want.