How is it determined which modules will be used?
 

When a linux system boots up, how is it determined which modules to load and use? Is there a file in /etc/ that says, "Yes, please use scsi.ko and forcedeth.ko, and never use ide.ko" ?

As a side note, does someone know where I can go to research what the modules are specifically for? I'm looking through google now.

Well, on my slackware I have /etc/modules.d/modprobe.conf, that load modules on startup. There is also a /etc/modules.d/blacklist where I can add modules that shouldn't be loaded.
I addition to this, there is a "Automatic kernel module loading" in the kernel.

So the kernel will probe the system and get then know what to use?

I'm not a kernel hacker, but something like that, yes. All I know is that it works ;)