This download looks like an addon. You need to extract the downloaded zip and put the addon folder in your Garry's Mod addons folder. You should end up with a directory structure similar to below:

• steamapps
  • common
    • garrysmod
      • garrysmod
        • addons
          • Holy-Hand-Grenade <-- Addon folder!
            • e.g.
            • lua
            • maps
            • materials
            • models
            • etc

• Holy-Hand-Grenade/
  • lua/
    • weapons/
      • Holy_Hand_grenade/
        • shared.lua
    • entities/
      • holyhegrenade/
        • cl_init.lua
        • init.lua
        • shared.lua
  • materials/
    • models/
      • holy_hand_grenade/
        • Holy_Hand_Grenade.vmt
        • Holy_Hand_Grenade.vtf
  • models/
    • GraffitiRTST/
      • Holy_hand_grenade.dx80.vtx
      • Holy_hand_grenade.dx90.vtx
      • holy_hand_grenade.mdl
      • Holy_hand_grenade.phy
      • Holy_hand_grenade.sw.vtx
      • holy_hand_grenade.vvd
  • sound/
    • ni.wav

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