There are two ways in which modules can be compiled and linked to Apache - statically, or as a DSO (Dynamic Shared Object).
Static linking is an older approach. With dynamic linking available on most platforms it is used less and less. The main drawback is that it entails recompiling Apache, which some people cannot do for a variety of reasons.
DSO is a more popular approach nowadays and is the recommended one for mod_python. The module gets compiled as a shared library that is dynamically loaded by the server at run time.
The advantage of DSO is that a module can be installed without recompiling Apache and used as needed. A more detailed description of the Apache DSO mechanism is available at http://httpd.apache.org/docs-2.0/dso.html.
At this time only DSO is supported by mod_python.