Tes4Mod:Complete Installation Guide for Oblivion/Part 2/OBMM/Introduction to Oblivion Mod Manager

Introduction to Oblivion Mod Manager
Ignore "beta" tags...

This simplest mod management approach is to use one tool for one task. Use the same process to address each mod. For OBMM users, this means getting every mod packed into an OMOD. Once a mod is in OMOD format, it can be activated and deactivated with a double-click.

In that mindset, mod downloads can quickly be broken into three groups: OMOD, OMOD-Ready, and neither. The first needs to be double-clicked to be loaded into OBMM. The second needs to be added via the OMOD Creation Window's 'Add archive', and then the OMOD can be completed. The last group requires a variable amout of work to ready for OMOD installation.

The examples below are not exhaustive, but they should give some idea of how to deal with various package types. Fortunately, most mods have a simple installation and package format, which means that the only thing to be done in the OMOD creation window after adding the archive is to fill out any relevant information. Check the mods' ReadMes to be sure.

Be Aware

OBMM has to be installed in Oblivion's install folder.
The default OMODs folder is  , and it can be changed via the Settings menu.
OBMM has a lot of useful features among its 'Batch actions', 'Import/Export' and 'Utilities' submenus.
Launching Oblivion through OBMM automatically launches the game with OBSE, if OBSE is detected.
Steam users need to have the   placed in the Oblivion folder in order for many OMOD scripts to recognize that OBSE is installed.
OMOD scripts are very specific to the contents of the OMOD with which they are packaged. Absolutely DO NOT add "extra" files to scripted OMODs. The scripts will probably break or the files may simply not be installed at all. Feel free to add patches and add-ons into separate OMODs (which can be installed after the "parent" OMOD). The only time to do otherwise is when you are instructed to add a specific downloaded file for an OMOD installer (probably separate from the mod download) or you modify the OMOD script appropriately for the changes.
In the OMOD creation window, there are two views corresponding to the radio buttons at the bottom of the window. If you are checking to see that a replacer's files were added as expected, since many of them do not have plugins, you need to select 'Data files' in order to see that its contents were imported.
When following OMOD creation instructions, choose "yes" if prompted about sub folders (unless the docs indicate that that prompt should not appear); otherwise, the OMOD will not extract all of the necessary files.

Heads Up
OBMM's conflict detector is unreliable, and does not offer nearly enough information about the conflicts it detects (most of which are not actually problematic). If you use many mods, or even a few that are of a similar type, they will overlap with one another. That is expected. (See Intro to Mod|] for more information.)
OBMM requires a lot of memory to run, and after processing many OMODs (or a few big OMODs) it may crash due to exceeding its memory limit, resulting in everything processed that session being forgotten. Therefore, after creating and installing a large volume of OMODs, restart the application, just to be safe. Using OBMM's 'export active OMOD list feature', which creates a list of which OMODs have been installed, is nice insurance. 
:''Note: If, ever, you have to reinstall OBMM, you can simply move your OMODs into the newly created   folder. After reinstalling you can use 'import active OMOD list' to restore OBMM's state.''
Another setting of relative importance is the temporary folder to which OBMM extracts archives during the OMOD creation process. After the cumulative size of created OMODs fills up the temp folder, OBMM will complain about being unable to finish due to lack of space. The path to the temp folder can be found via its setting in Settings. Getting around this limitation can be achieved by moving the temporary folder to an unlimited folder (i.e., a folder in My Documents or a number of other locations) or cleaning out the temporary folder during long sessions (but make sure OBMM is not in the middle of processing anything).