Change Log?

So, what are some of the changes this mod makes? According to a post on the Insane Difficulty forum, this only works on the Steam version, and since I have my original discs still, I'd be buying that Steam version just for the mod. I'm sure there are a lot of changes, so let me ask about two things that I'd most like to see in an FF7 mod.

First off, character differences. In the base game, the characters are functionally identical except for their limit breaks and a few weapons. Given that the only character with limit breaks that aren't simple "Hit the enemy REALLY hard." isn't around for the whole game, it made most of the cast feel too identical, with only really Cait Sith and Vincent to stand out. And as your limit break level got higher and it took longer to charge the gauge, those differences became rarer.

Second, character customization. The vast majority of useful materia is magic materia, especially early on. There's nothing you can really do to build a physical-oriented character for most of the game, except to avoid equipping too much magic-materia, but most of the alternatives aren't that big of a deal either, until you reach the end of the game. There is no Stength Up Materia, for example. Magic ends up being something that every character uses, with attacks being almost completely relegated to "What you do when you don't want to spend MP".  While that's not a bad system, it would be nice to have some more interesting physical attacks. Perhaps by making the characters more distinctive in ways other than their limit breaks.

Those two things are specifically addressed as the core focus of the mod. Characters are differentiated by their available stat growth, passive special abilities, and more diverse equipment. Stat growth and equipment each have choices you have to make in order to nail down which of several niches you want a given character to fill, and materia other than pure magic are extremely valuable - my most powerful character was a Tifa who punched things and counterattacked a lot, and by the end of the game I was actually disappointed when she got a Limit Break because it meant her damage output went down for reasons that are too arcane and spoilery to get into here.

a more detailed explanation would be beneficial 

Sure.

The mod introduces a stat growth system. Sources are removed from most of the game, so this new system is the only way to improve a character's base stats (Strength, Vitality, etc.). As you fight, you'll accumulate points that can be spent to give characters a pile of Sources that only they can use - each time you do this, you'll have a choice of one of several ways to distribute them. Since each character has their own list of options, some characters are naturally better to some roles than others; but since each character has several options, and you can choose a new one every time you do this, there's customization.

Characters also have unique passive abilities to help differentiate them. Some have modes that you can influence (Barrett, for instance, gets different bonuses depending on which row he's in), but generally this is more for helping the characters be different than customizable.

Equipment now has large effects on stats, and most characters have access to mutually exclusive options, meaning that you'll spend more time figuring out which piece of armor or which weapon is best for the role you're having a character serve than picking up the next step in a linear sequence of upgrades.

Attack and magic damage have been balanced to bring them more in line with one another, and materia's stat influence is played up more.

For more technical and detailed info, download the mod and see the readme. I think I'd just be repeating it if I get any deeper.

Just a heads-up for the OP, the mod does work on the original 1998 version. The Steam game is just easier to set up as the 1998 version requires Aali's driver to be patched onto it before it will work properly on a modern PC.