Action Replay is a memory device (varies for each system) that holds certain save information that can alter your experience with any game. Most of the time it is actually a disc that you simply copy the information from the disc and save it on your memory card. From that you play the game you loaded codes onto and then you'll experience whatever you have loaded.
Now technically, all action replay is are a bunch of altered coding in a game, so it's pretty much modding without the risk of you blowing up your system. All the guys do that make action replay is take a game, see what they can do with it without destroying the game, and then put the coding on a disc or memory unit, copy, and then sell to stores. If you buy an Action Replay, it's pretty much buying mod service. It's not a bad thing though, I would never try modding unless I was absolutely sure I knew what I was doing.