The word's outlines are warped into a standard container shape before any other effect runs, so the face, extrusion, strokes, bevel, halftone and banner all inherit the shape. Amount sets how strongly the shape pinches or tapers, and its sign flips the family: minus gives a bowtie or applecore, plus a hexagon or football; for pennant, arch, chevron and heart it mirrors the direction. An optional container is drawn behind the shaped word with its own fill, stroke, corners and margins.
Shape is applied as an Illustrator live effect, so the text stays editable. Change the word, the font, or any slider afterwards, and save the result as a Graphic Style to reuse it.
How to fit text into a shape in Illustrator → walks through the manual Illustrator steps, then shows the one-click version.