A module is the entry point into your custom assembly. It can be used to provide properties and methods for the other classes in your assembly. Its main purpose is to indicate to the Core Server Module that this assembly has been created and could contain some overridden Server APIs and/or some new Server APIs. So think of it as someone waving a flag saying, "Hey, I'm here, and I could contain some APIs." The settings.xml file contains the configuration to tell the Core Server Module where this custom assembly is and that it could potentially contain some Server APIs.