If you have multiple hard drives, it doesn't necessarily need to be in the C drive. For example, I generally prefer not cluttering up the same hard drive as my OS with tons of other software when I don't need to, so I install all my games onto other hard drives. This is however simply a matter of personal preference, and downloading games onto the C drive won't hurt anything, usually. As long as you are being careful not to download anything from suspicious sites that might be distributing viruses/malware.
Once you do decide what hard drive to install onto, I'd recommend making a folder titled "SRB2" like Rapid said on the hard drive of your choice, and placing the installer into that. This way, you can easily find the directory again if you need to. Then simply run the installer to install the game. It's been a while so I don't remember if the installer asks you what directory to install the game into, but if it does simply direct it to the SRB2 folder you just created and allow it to unpack the game files.
Once this is done you can either download addons into this same folder, or create a new addons folder yourself to prevent the main directory from getting cluttered. It's up to you. If you are loading addons via a launcher a community member made for the game, you can even go so far as to make multiple more folders inside the addons folder to group addons by type, such as "Characters", "Single Player Stages", "Multiplayer Stages", etc. to make things even more organized. Then simply point the launcher to the addons you want to load, and it will handle the rest while booting up the game.
