So, I have read that Oblivion should be not be installed in Program Files, but in another directory like C:Games. I would assume that mods should be installed in whatever directory you install Oblivion.

What about other files that you use to manage mods like Wrye Bash or programs to make the controller work properly like Xpadder? Do they go in Program Files or in the same directory you install Oblivion?

Also, can anyone explain what the problem is with installing Oblivion in Program Files? From what I have read, it sounds like it has to do with the way Windows manages the program files in that folder. I have not done any type of programming since the days of DOS and I am trying to understand how mods work in the context of a modern computer so I can make the jump from console to PC gaming without messing up my new PC. I have read lot online, it is a bit overwhelming at times, and I could not find answers to these rather basic questions.

Thanks in advance!

Windows is so overprotective, it even blocks some stuff from working if it is in the Program Files directory (With or without notice). In Windows 7, it was a easy fix by just disabling UAC but Windows 8 (What I have) was a little strange. Even with UAC off, some things still did not work (MGE for Morrowind, for example). Upon researching it, I learned that some stuff like games and Steam are best kept in a different directory than Program Files.

Personally, I just made a "Installed games" folder in My Docs that has all my games and Steam installed there, same goes with mods and everything is smooth as butter. As for things like Wrye bash, I do not know what to tell you there as I do not really use it (I am a light game modder), but it shouldn't hurt to have it have its own folder in a place like My Docs or anywhere of your choosing that UAC won't have a fit about.

They can go anywhere you want.

The problem is the security system that was put in place as of Vista, called User Account Control, or UAC. It prevents viruses from installing themselves in the Program Files folder by sending some things off to a virtual folder rather than the actual hard drive location. This can cause problems when you're using mods since the game may not find them in the location they're supposed be, in your Data folder. If a program is using a recognized install program though, like the utilities you mention, it's not an issue. It's just mods that can get redirected.

Awesome! Thanks everyone for all the info.