Backup your saved files: the first and most important step. Modding is not officially supported by the developers, so make a backup before you start messing around with the game. You can find said files in:

C:\Users\<username>\AppData\LocalLow\IronGate\Valheim .

Copy the whole folder, so if anything goes south (as it sometimes does), you will be able to restore your world and character.
Download BepInEx pack for Valheim. This is a framework that allows modding of the game, so it is absolutely necessary to have. After you download the zip, place the files in your Valheim install folder and you are good to go.
Download the game’s Unstripped DLLs: that’s another piece that you need in order to install Valheim mods. It is highly advised to use Vortex in order to install these files as the mod manager creates its own temp folder and does not override any of the game’s original DLLs. If you do not want to use this software, the page has detailed steps on how to apply the new DDLs yourself.
Speaking of Vortex, it is recommended that you use it when installing mods. You can download it from its Nexus page. When you run it, the software will detect which games installed on your PC can be managed.

Select Valheim and then specify its install folder:

for example C:\Program Files(x86)\Steam\steamapps\common\Valheim

When done, start the game via Vortex instead of Steam.

Help Installing Valheim Mods Manually and Vortex

This post worthy of Valhalla?