ok... i think i can give a basic explanation here.
in linux, like unix, all the hardware devices are represented as files, in the /dev directory. the /etc/modules.conf file is mostly for determining aliases for the modules that are used on a system. so, if a program calls for the "sound" module or the "alsa-sound" module to be inserted, the system knows to call the correct driver; on my system, this happens to be "es1371" - and modules.conf sets the aliases so that not each individual program needs to know what hardware you have, just the kernel.
most installations will auto-detect the settings, and write them to the /etc/modules.conf file, but the kernel will use whatever module is indicated in the file, whether it's the right module or not. the kernel itself doesn't really decide which module is appropriate, the setup and installation programs do, and the kernel just follow orders.