MLOs are custom interiors. On FiveM they function differently from single-player - instead of being managed by the player's local install, they are served by the server, downloaded by the client, and handled through the framework.
This page explains the difference. For the general term, see the MLO glossary.
How FiveM ships MLOs
When you join a FiveM server, the framework downloads that server's resource bundle (with whatever custom MLOs that server uses) and loads it into your client. You never install an MLO yourself; the server implicitly installs them for you.
This is how FiveM RP servers are able to distribute dozens of MLOs without players having to install or manage them themselves. The friction happens on the server admin's end, not the player's.
Why FiveM dominates the MLO market
Two factors. One, install friction - installing MLOs in single-player is tedious and easy to break. FiveM removes that friction by auto-distributing them. Two, demand - RP servers need a lot of custom interiors, and that demand drives a marketplace.
From 2022 onward, the vast majority of new MLO development was targeted at FiveM. Single-player MLOs still exist, but have a much smaller community.