Create a new subdirectory under [base drupal location]/sites/all/modules . Install optional and custom modules in the new subdirectory.

Don't use the "modules" directory that is created with your base Drupal installation. When it comes time to upgrade Drupal itself (e.g. 6.14 to 6.15), you need to be able clearly identify optional and custom modules. Therefore, create a new subdirectory under [base drupal location]/sites/all/modules.