I have read through the readme and I must be overlooking something. Do I just drop all the contents of each mod into the Mods folder or do they need to be put somewhere else?
The general pattern is that a modlet's directory/folder goes into a Mods directory/folder HERE...
%APPDATA%/7DaysToDie/Mods
For instance you'd put the ZZTong-Prefabs modlet's folder would be %APPDATA/7DaysToDie/Mods/ZZTong-Prefabs
You can tell a modlet's folder because it has a ModInfo.xml file in it, other files and folders. A common mistake is that when you unpack a ZIP file you might get another layer of folder.
Each modlet gets its old folder under Mods.
It is handy to know that %APPDATA% is a variable that Windows understands. It usually refers to C:\Users\USERNAME\AppData\Roaming where your user ID plugs into USERNAME so that it is unique to each users on the system.
When you start talking about using Overhaul Mods and/or Mod Launcher, then things can change away from this pattern. You'll want to follow the instructions for them.