- 1 Overview
- 2 Parameters & Definitions
- 3 Guidelines
- 4 Techniques
- 5 Discussion
- 6 References
Distortion alters a sound by pushing its signal past the maximum level, which shears off the peaks and troughs of the waves in a process known as clipping. The resulting sound has less dynamic range, longer sustain, more harmonic overtones, and is often described as "warm" and "dirty" depending on the type and intensity of distortion used. 
While distortion is often used intentionally as a musical effect, it is also important to take steps to avoid unwanted distortion, such as unintentional clipping.
Distortion is a non-linear process, meaning that instead of being applied to the entire signal, it is only applied to portions of the signal that exceed a specific volume threshold.
Parameters & Definitions
Distortion vs. overdrive vs. saturation
The terms distortion and overdrive are often used interchangeably. Where a distinction is made, distortion is a more extreme version of overdrive.
A third term - saturation - is used to describe an effect that arose from pushing the amplitude limits on analog gear, which results in a less extreme type of clipping, sometimes referred to as "soft clipping". Today, saturation is common in digital devices that emulate the sound of tubes, tape, or transistors being overloaded. 
Saturation entails compressing the signal in a manner like a tape or tube would, whereas distortion/overdrive is more like a re-shaping of the waveform.
Other common parameterss
Simplify chords structures
Heavy distortion can result in unwanted dissonances when playing chords due to the added overtones produced by the effect. To get around this, it is common to restrict playing to single notes or simple "power chords" (root, fifth, octave) when using heavy distortion. However, lighter distortions can be used effectively with triads and seventh chords.  As a general rule of thumb, the more distorted a sound is, the less harmonically complex it should be.
Distortion also reduces the dynamic range of a sound due to its compressed output. Heavily compressed instruments will limit the ability of the player to control how loud or soft it sound. Heavy metal music has evolved around these restrictions, using complex rhythms and timing for expression and excitement instead.  The same principle applies in music production: heavily distorted sounds require foregoing dynamics in favor of other forms of expression.
Especially when you’re adding it to multiple tracks, it’s easy to overdo saturation. Adding too much can soften the transients on your tracks and make a mix sound mushy and less impactful. After adding saturation to a track, always check it in the context of the entire mix. A little bit can go a long way. 
Avoid using multiple instances on a single chain
Keep in mind that you want to avoid using the same type of saturation or color multiple times in the same signal chain. This will result in the build up of some of the resonation frequencies or harmonics that occur, and can render the final output as two-dimensional and bland.  If you are going to saturation both a channel and a group that it is in, used different styles (e.g. tape and tube).
Introducing warmth to digital tracks
A little bit of subtle tube harmonics or tape saturation, whether on an instrument or voice, can make it sound more pleasing to the ear.  In general, when going for warmth over a distinct distortion effect, try using saturation first. It is often perceived as a more natural and spongy kind of compression.
Some producers will even put a touch of saturation on the master buss to emulate mixing it down to a stereo tape machine. The same thing can be done with tube emulation. Be very careful with any distortion that you place on the master and make sure that your plugin is outputting in stereo. 
808-driven clipping in hip hop
Many people are quick to say that clipping is always a bad thing. Especially on the master. The reality is, music is always changing because artists are always breaking the rules.
In most cases, it is probably best to use traditional distortion - such as overdrive or saturation - to introduce harmonics and clipping into an 808 sound. This can make them sound fuller and grittier. However, as producers in hip hop continually compete for subwoofers worldwide, the boundaries are being pushed and intentional clipping on the master is more common than ever.
If you're going to push the volume beyond what the master channel can handle, just remember that you will lose all other signal (vocals, drums, etc) as the signal clips.