In your definition, if we plug $0$ into that we don't get $0$. Because your definition starts with $1$, so the case for $n = 0$ simply isn't defined. Usually it is defined $0! = 1$.
You can therefore define factorial like this:
$$n! = \begin{cases}1 & n = 0\\
1\cdot2\cdots n & n > 0
\end{cases}$$
Alternatively, if you don't like the above definition, you could use the Gamma function definition:
$$\Gamma(t) = \int_0^\infty x^{t - 1}e^{-x}\,\mathrm dx$$
and the put
$$n! = \Gamma(n + 1).$$
Note that the Gamma function is defined for real values, whereas the factorial only for natural numbers.
but why the modulus?
The short answer is: because the modulus tells us whether one number divides another.
Some elaboration on that cannot hurt, of course. So let us elaborate. The notation
$$a \equiv b \pmod{c},$$
where $a,b,c$ are integers, by definition means that $c$ divides $a-b$, i.e. there is an integer $k$ such that $a-b = k\cdot c$. Hence $c$ divides $a$ if and only if $a \equiv 0 \pmod{c}$, and to see whether $i$ divides $n!$, we must check whether $n! \equiv 0 \pmod{i}$. The thing that makes this feasible for large $n$ (and $i > n$, it's trivially true for $i \leqslant n$) is that we do not need to compute $n!$ to see what remainder that would leave when divided by $i$. The property that allows this is that for all integers $m$ we have the implication
$$\bigl(a \equiv b \pmod{c}\bigr) \implies \bigl( ma \equiv mb \pmod{c}\bigr).\tag{$\ast$}$$
This is easy to see: since $a\equiv b \pmod{c}$ means $a-b = k\cdot c$ for some integer $k$, it follows that $ma - mb = m(a-b) = mk\cdot c$ for that same $k$, and $mk$ is of course an integer. So $c$ divides $ma - mb$, i.e. $ma \equiv mb \pmod{c}$.
And your algorithm is just applying $(\ast)$ at each step in the calculation of the factorial. Inductively, if $k! \equiv r_k \pmod{i}$, then by $(\ast)$ we have
$$(k+1)! = (k+1)\cdot k! \equiv (k+1)\cdot r_k \pmod{i}.$$
And then $r_{k+1}$ is the remainder of $(k+1)\cdot r_k$ upon division by $i$.
And clearly, if $r_k = 0$, then $r_{k+1} = 0$ too, so if we ever have a remainder of $0$ before reaching $n$, then we also have $r_n = 0$, i.e. $i$ divides $n!$.
Reducing modulo $i$ at each step solves the space problem, since none of the intermediate results is larger than $i^2$. But it's not the most efficient algorithm, since it typically requires $O(n)$ multiplications and divisions (reductions modulo $i$). It is more efficient to find the prime factorisation of $i$ (in the range up to $2^{32}$ that is still efficiently done by trial division), and then check whether each prime dividing $i$ occurs with a high enough exponent in the prime factorisation of $n!$. The exponent of a prime $p$ in the factorisation of $n!$ is quickly found using de Polignac's formula.
Best Answer
The factorial function $x \mapsto x!$ is by convention written in "postfix" notation, like exponentiation $x \mapsto x^n$. The convention is that these postfix operators have high precedence (i.e., you evaluate them before other operators unless parentheses tell you otherwise): $3x^2$ means $3 (x^2)$ not $(3x)^2$ and $2n!$ means $2(n!)$ not $(2n)!$.