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Milkshape is a 3d editor, this is the program you use to create meshes. It is not free, but there is Blender and Wings 3D that both are and do the same thing. SimPE is the tool used to get that 3d mesh into a package the game can read.
If you want to create something then you need both. Please visit MTS2:Sims_2_Createwiki for tutorials on creating.