Here, a sine function is clipped, meaning that the function goes beyond the allowed maximum and minimum levels and so the tops and bottoms are chopped off. This distortion causes new frequencies to be introduced; these frequencies can be heard when the function is played (by clicking the Sound checkbox).
Press Sine to get a clean sine wave, and play it for comparison. Press Clip to clip it, multiple times to increase the amount of clipping. If you press it enough times, the waveform becomes a square wave.