How do maps work?
When you play a map, does it temporarily apply the map in your Mods folder, or does it just load the map (like SC1)?

Can you please be more specific

I think it downloads the map in some Cached folder, and once you're done playing it, it auto-deletes itself... or something like that.

This. I know someone found a way to compile the cached versions of maps so that you could potentially download "protected" maps that you otherwise can't load in the editor from Battle.net, but I don't think you're supposed to be able to do that.

If you meant a temp folder it does keep any memory unless the triggers specifically allows banking (if mod folder is a typo?) if you want to play a mod i think you need to download it unless someone has figured out a way to allow mods to be dl'ed on b.net

Thanks for the info.
What is, if known, the caching folder?
And also, does the 'Mod' folder do anything when playing maps?

The Cache folder is in the Starcraft 2 Directory. This depends on your operating system.

The 'Mod' folder does nothing when you play maps. However, if you were to create a mod and wanted to add it as a dependency to your map - you would have to save it into that folder... for some reason you cannot browse when adding Dependencies. I guess this is because if you were to publish a map that utilizes a mod to battle.net Starcraft 2 will need to know where the mod file is saved also...