You can extract the contents of a zip file to anywhere you like. Normally the best place, at least to begin with, is the same folder as the zip file, or a new sub-folder of it, perhaps called Extracted Files. If the zip file only contains one file it doesn't really matter. If the zip file contains lots of files in sub-folders then it does matter. You can move the extracted files afterwards if you wish.
For Trainz-related materal, a zip file is most likely to contain CDP files, EXE files, or KUID folder trees. Here's what to do with each:
CDP files: one by one, double-click them and they will install themselves. With TRS2004 that's all you need to do. With TRS2006 I think you might need to go into the dreaded CMP and do something else (commit?) - perhaps an expert could comment further if required.
EXE files: one by one, double-click them and they will run. What happens next can vary enormously. Refer to the web site where you obtained the zip file if you need instructions.
KUID folder trees: with TRS2004 these should be copied manually into the Downloads folder. Sorry, I don't know what to do with them with TRS2006, or even if they can be installed into TRS2006 at all. Again, someone with more knowledge may be able to comment.
If the zip file contains anything else, post here with details and we'll take it from there.
Hope this helps, John