This program allows you to load mods in Sonic & Knuckles Collection. It also features a custom music playback engine with support for MIDI, SMPS (Megadrive), VGMStream (ADX, BRSTM, etc), and other music file formats. There is a configuration tool for the music player included in the "Music" folder. Mods can also include their own Music folder to override the base settings, allowing for easier switching of music.
The music player will default to using the SMPS music from the original Megadrive version of the games. There is a mod included that switches to the MIDI music from the PC release. Unfortunately (or fortunately, depending on how you feel about it), the MIDI playback method used by the mod loader requires the use of a soundfont file, so the MIDI music will not sound exactly the same as it normally would. The selected soundfont can be changed in the music configuration tool.
If you had the old SMPS Player or HQ Music mods, you should remove them, as this has the functionality of both, and is incompatible with those mods. Additionally, if you've injected custom MIDI data into the game's MIDIOUT.DLL, you will have to export them to MIDI files and use the mod loader's music configuration to play them, as it ignores the original MIDIOUT.DLL entirely.
You put it in the same folder as the EXE, right? But, it doesn't seem to work at all. I outright reinstalled the game and then put all of the stuff back into there, but it still doesn't seem to actually do anything.