It's to set up a mod folder, not to be installed into the base data dir.
What you do is run the installer, point it to your M2TW directory (where your medieval2.exe resides), then enter a name for the mod (usually mymod) and it'll automatically create a folder and two files called mymod.cfg and mymod.bat in your M2TW folder. You start the mod using mymod.bat
If you did that and it worked, only then you go ahead changing something and seeing if the change shows up in the game.

Once you verified that the mod folder works correctly, you do your changes to M2TW/mymod/data - not to the original data folder.