I have the gog offline backup installers for the games I bought on gog
Does it matter were I set install location to, and do I need to install in a folder or a folder with a certain name?
Today I just installed directly onto my c drive without any folder and when I open my c drive the game instillation is one of the folders. Can this cause problems with my game?

Well I installed it on both my PCs, my main PC on an HDD in a folder called gamez with a bunch of other game installations in it to, and on my test PC I installed directly to c booth ssd to save time to quickly test mods before I archived
On a Blu ray with the mods and some install instructions. I wanted to know for future reference if it mattered, so if I install in any old folder with a name like games or gamez or whatever im fine?

I strongly suggest to only install programs to a folder you create yourself, e.g. c:/mygames, c:/myprograms. Windows folders are protected and this can lead to issues with certain games.
Also some games do not like removable media, or linked folders, so I would just use the ones in the machine.
What do you mean by archive to a Blu-ray? First off I would again strongly avoid the use of physical media for storage or back (two distinct things!). Size quickly becomes an issue, where one hdd can hold lots, a Blu-ray is needed each time. And then cost can soar also. Then there is maintenance, imagine having a thousand games, each maybe having some updates, you need to insert each disc, re-write, then the next. Logistically it becomes a nightmare very very quickly. A hdd however you can connect and use a tool like freefilesync to identify any changes and copy.
Next up, do not store the installed version of a game. You can maybe keep a copy with mods on, but for backup keep the installer and mods separately. There is no guarantee that an installed version with or without mods will run in future and it will take up far more space. What I do is keep the installer and mods separately as they come, and an instruction sheet to install it all. This also helps if you want to switch out mods, or install extra ones as you are going from fresh install. So I cannot recommend highly enough, keep installer and mods as they come, do not keep installed versions.

It shouldn't (with one exception) but I would echo nightcraw1er.488's advice about avoiding the Windows or Program Files folders (not least since mods that change the game .exe file/folder can raise numerous UAC prompts if your game folder is within Program Files).

The exception is older games may take exception (i.e. crash on startup) with very long/nested folder names (Ultima 7 being one example). If the game is old enough to use DOSBox, that's less of an issue since you can (and indeed need to) map the long folder name to a virtual disk drive. Having a backup on write-once media has its plus points (no chance of mistakenly erasing or overwriting it, quality optical media will likely last longer than most HDDs) and space is less of an issue with older games. However for backing up larger games libraries, it's hard to beat the convenience and portability of an external HDD. I'd agree with the need to backup the offline installers first, but there is a good argument for keeping a further backup of an installed game which has been extensively customised (with mods, .ini file edits, command-line parameter changes, etc). However this is better done via a full image backup (using software like Macrium Reflect or Drive Snapshot) since that will then include Registry entries (which may themselves be customised) and saved games.

Expanding on the other answers, I remember having read that since the MS-DOS days, the best compatibility for games tends to be in the root of the C: drive.

Some games (specially Japanese ones from may tests) don't like long paths.
Other games (specially some older ones I've checked) don't like being placed in other drives, e.g. D:.
And I remember testing some games that wouldn't work at all in a virtual machine's shared folder mounted as Z:.

Minor point on your first bit, you would have multiple backups at multiple time points (I have weekly, monthly, half yearly, and certain historical hard copies). HDDS are dirt cheap now and take up very little space, so you can have loads quite cheaply and simply.

In terms of customised, perhaps yes. If you keep the installer and mods as their own items as well. Often if you try to copy an installed version with mods it may break, and they always say to use a fresh install. Also, it’s likely you will want to chop and change so that becomes a lot harder and riskier without a fresh install.