The 'hot coffee' mod for Grand Theft Auto resulted in the game's rating being changed from Mature to Adults Only. Many games not only don't mind modding, but the game's developer actually encourages it. There any many legal implications to modding, and who owns the resultant IP. See, for example, Microstar v. Formgen Inc., 154 F.3d 1107 (9th Cir. 1998).

But that's not the point of this post. I just wanted to point out a Yahoo! article with some interesting musings about modding.