The Texture Displacement Modifier uses a procedural texture to deform a mesh.
The value of the 3-D texture at position of a mesh vertex in space determines how far the vertex is pushed away from its original position. The magnitude of the position change of the vertex as a function of the grey value of the texture. The direction can be chosen to be radial (set the radial flag) from the local coordinate system or you can use the widget to set the direction.
The Magnitude dialog:
In the Magnitude dialog you set the function that determines the distance a vertex is pushed based on the grey-scale value of the texture at its original position in space. The values of the texture is in the range [0,1]. The variable that carries these values is "x". So, if you use the default "x" as a function, the vertices will move between 0 and 1 units.
The example mesh show in the figure below uses a "clumpy" texture with a few hundred clumps distributed in the spatial domain. The function that is used as magnitude of the displacement is 15*(x-0.5). The reason we subtract 0.5 from x is to allow the texture to not only push outwards making the shell necessarily larger, but also inwards, such that the average radius stays approximately the same. The factor 15 then extents the maximum range for the displacement to that value.
Texture:
Use the Texture dialog to choose and customize the texture that controls the Texture Displacement modifier. See the page on the Texture key subsystem for information on how to setup a texture.