This is an overdrive effect that contains pre-dist. filter to eliminate presence of the original sound and post-dist. bandpass equalizer for getting rid of unwanted frequencies. Distortion is generally a very good tool for making razor sharp sounds out of synths with low lowpass filter cutoff and high rezonance but this is unfortunately not that case. The guitar-like nature is limiting it's usage to only few techniques.
Gain: This amplifies signal that goes into the distortion.
Edge: Amount of distortion
PreLowpassCutoff: Pre-distortion lowpass filter, mainly useful for controlling the presence of the original sound. But it doesn't provide control for resonance so it's much better to use Modplug internal lowpass filter.
PostEQCenterFrequency: Center of the bandpass equalizer (in hz).
PostEQBandwidth: Width of the EQ band (in hz).
Here are 2 examples of what can be done with this effect.
Simple guitar distortion
Load a clean guitar sample into Modplug, set it's cutoff to 800hz and rezonance to max. Now enable the Modplug internal equalizer with these settings:
Of course, you can't make a song with this EQ enabled, it's only meant to be a reference for an external plugin. The amount of clean guitar sound presence can be controlled with the instrument cutoff (800-1400hz seem to give the best results).
Light synth/kick drum distortion
Enable dry mix. This can give a sinister feeling to vocal choirs or synth pads and increase fatness of electronic kick drums.