Distortion and overdrive: Distortion and overdrive units re-shape or "clip" an audio signal's wave form so that it has flattened peaks, creating "warm" sounds by adding harmonics or "gritty" sounds by adding inharmonic overtones. In tube amplifiers, distortion is created by compressing the instrument's out-going electrical signal in vacuum tubes or "valves". Distortion pedals produce perfectly flattened peaks or "hard" clipping. Overdrive pedals produce "soft” tube-like distortion by compressing the sine wave without completely flattening it. Much like tube amps, overdrive units produce "clean" sounds at quieter volumes and distorted "warm" sounds at louder volumes. Distortion and overdrive pedals may either be transistor-based or digital. While distortion pedals are most associated with electric guitar, they are also used with bass guitar (fuzz bass), Hammond organ and electric piano.
source: Wikipedia