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The Steam site handles all downloadable content and updates for Railworks.
You need it on your computer for Railworks to work correctly as far as I can see. I have had the game since it came out, always being updated automatically by the Steam site. Not sure about playing offline as I have always played online. There are currently patches being applied to sort out the problems with the latest upgrade to Rail Simulator2012. Hope this helps.
Mike.
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