The output of an electric guitar is controlled via the volume control. The volume control can also be used to ‘ride the volume’. This is when a distorted tone is set on the amplifier and the volume control is lowered. This affects the amount of gain (overdrive) being produced and therefore ‘cleans’ the sound up.
The use of tone dials also play a large part on the sound the guitar produces. The tone controls are basically a frequency filter. If the tone is rolled down to zero the high frequencies are cut and bass frequencies more prominent. If the tone is set higher the bass frequencies are reduced and the higher frequencies are more prominent.
The tone controls would be set based upon the music being played. When playing clean funky guitar parts the guitarist may want to make use of higher frequencies so would set the tone to a higher setting. For a bluesy guitar solo a muddier sound could be the preferred sound so the tone would be dialled lower.