How to exclude folder from “Explore” tab?

Use files.exclude:

• Go to File -> Preferences -> Settings (or on Mac Code -> Preferences -> Settings)
• Pick the workspace settings tab
• Add this code to the settings.json file displayed on the right side:

    // Place your settings in this file to overwrite default and user settings.

    {
        "settings": {
            "files.exclude": {
                "**/.git": true,         // this is a default value
                "**/.DS_Store": true,    // this is a default value
    
                "**/node_modules": true, // this excludes all folders 
                                        // named "node_modules" from 
                                        // the explore tree
    
                // alternative version
                "node_modules": true    // this excludes the folder 
                                        // only from the root of
                                        // your workspace 
            }
        }
    }

If you chose File -> Preferences -> User Settings then you configure the exclude folders globally for your current user.