How does radar receive Mode C information? I know primary radar of ASR can determine only slant range, so by using Mode C transponder, ATC can know the altitude of aircraft.

And I found that if altimeter setting of radar is changed, displayed altitude also be changed.

So I guess that Mode C transponder can deliver only pressure information not altitude information. So Radar convert this pressure information to altitide information referring to radar altimiter setting. And it is not important what altimeter seeting pilot set.

Is it correct?
Correct.  Mode C responses include the pressure altitude.  This means that many installations use a separate altitude encoder that has no barometric settings.

Whether it is integrated or a separate unit, the kollsman setting does not change the pressure altitude reported.

From http://www.faraim.org/aim/aim-4-03-14-133.html


  
  Mode C Veil. [...]  Unless otherwise authorized by ATC, aircraft
  operating within this airspace must be equipped with automatic pressure
  altitude reporting equipment having Mode C capability.