That's because it edits your item.dat file. The modifications and changes are only visible to you or whoever else has that specific edit of your file in the custom folder for you. It doesn't upload and sync with the server and everyone else's versions.
It's like installing a custom skin for a champion in league of legends or similar.

The only way you can change how your character looks for other people on Toribash is by having the items activated in your inv.