For the module to be functional, you first have to go to Site Manager -> Settings -> Bad words and enable the Check bad words option.
On this page, you can also define the default action that will be assigned to newly created bad words if the Use default settings option is enabled in the bad word creation dialog (see Defining a bad word for more details). The default action can be selected from the Bad word action drop-down list.
Default replacement string can be entered into the Bad word replacement field. It will be used in case that a bad word is detected, the Replace action should be performed on its detection, but has no replacement text defined (i.e. has the Use default settings option enabled for the Replace by field).