Can someone please remind me how open battle works. Can I run modded game there and can players join me?
I can imagine this is will be similar like in sc2. There are a lot modded games inside sc2. You just click which modded game you want to play then you play solo/group like you want.
Open battlenet was like the wild west. Anything goes because you just use your singleplayer saves.
That means you can edit op items and take them into multiplayer. I used to enjoy watching insane hacked item duels, players that would have millions of hp and still one shot each other, with all the auras going at once 
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Shadow nailed it. The game is hosted on the computer of the person who makes the game. Single player saves are used which can be highly modified. You also are establishing a direct connection to someone else - not hosted by Blizzard. That may result in security concerns for some folks.
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Its not the saves i am curious about. Its the game version. Lets say I mod the 1.10 and change few skills. Can I enter open battle net with it and someone with some patch can enter my game?
Open bnet was super fun I remember editing my characters with like tons of godly gear and jewels then dueled people for fun. Paladin was ridiculous when it was messed with through the editor.